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Judge dismisses Banq’s bankruptcy case, citing bad faith filing

Judge dismisses Banq’s bankruptcy case, citing bad faith filing

GrafaGrafa2024/10/15 02:05
By:Isaac Francis

Banq, a crypto neobank, had its Chapter 11 bankruptcy application dismissed by a U.S. judge in Nevada, who ruled that the filing was made in bad faith. 

According to Judge Natalie M. Cox, the bankruptcy application was a tactic used to shield the company and its founder, Jon Jiles, from ongoing litigation by a major creditor, N9, rather than a legitimate attempt to reorganise the business. 

Banq filed for bankruptcy in 2023 amid legal action from N9, which holds a $3 million stake in the company. 

N9’s lawsuit alleges that Jiles failed to uphold his fiduciary duties, prioritising the interests of Prime Trust, where he was the founder, over those of Banq. 

The lawsuit claims Jiles used his control over Banq to benefit Prime Trust, leading to the neobank’s downfall. 

In her ruling, Judge Cox emphasised that Banq's bankruptcy was not a valid business reorganisation plan since the company had no revenue sources. 

Instead, its operations focused primarily on litigation against its former CEO, Scott Purcell, who allegedly diverted $17.5 million in assets and technology to his newly founded company, Fortress NFT Group. 

“It is apparent from the totality of the circumstances that Debtor’s actual purpose in filing this case is not to successfully reorganize,” Cox wrote, concluding that the case was filed to protect Jiles from N9’s claims of breach of fiduciary duty. 

According to the court's findings, the bankruptcy filing was a litigation tactic meant to serve Jiles' interests, rather than a true attempt at reorganisation. 

As a result, the case was dismissed, leaving Banq and Jiles to face N9's lawsuit. 

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