Banq, a crypto neobank that filed for Chapter 11 bankruptcy in a U.S. court in Nevada, had its application dismissed by Judge Natalie M. Cox. The judge found that the bankruptcy filing was a tactic to shield the company and its founder Jon Jiles from ongoing litigation by creditor N9.
N9 has sued Banq and Jiles, alleging that Jiles failed to fulfill his fiduciary duties by prioritizing the interests of Prime Trust, where he was a founder and managing member, over Banq’s. The lawsuit claims that Jiles did not create a non-compete agreement between former Banq CEO Scott Purcell and Banq, only between Purcell and Prime Trust. This allegedly led to Banq’s downfall as Jiles leveraged his control over the company to benefit Prime Trust.
Furthermore, Banq is suing Purcell for allegedly shifting the company’s focus from crypto payments to NFTs before transferring assets and technology to a competitor he founded called Fortress NFT Group, which is a central part of its bankruptcy claims.
Judge Cox ruled that Banq’s bankruptcy application was not a legitimate business reorganization since the company had no sources of revenue and its main operations revolved around pursuing litigation against Purcell. The judge noted that Jiles had funded the bankruptcy proceedings with a $225,000 loan through his company NVF LLC, indicating that the case was designed to impede N9 from holding Jiles accountable for breach of fiduciary duty.
In essence, Judge Cox stated that the bankruptcy case was a dispute between Banq, Purcell, and Jiles rather than a genuine bankruptcy filing. The judge concluded that the purpose of the bankruptcy case was to advance the self-interest of the Jiles parties, rather than a sincere attempt at reorganization.
It is evident from the ruling that the court saw through Banq’s attempt to use bankruptcy as a shield from legal action, highlighting the importance of upholding fiduciary duties and ethical business practices in the corporate world. The case serves as a cautionary tale about the consequences of prioritizing personal interests over those of the company and its stakeholders.
Overall, the dismissal of Banq’s bankruptcy case sheds light on the complexities and challenges of corporate governance, legal proceedings, and ethical responsibilities in the business world. It serves as a reminder that transparency, accountability, and integrity are essential in maintaining trust and credibility in the financial industry.
