Judge Dismisses Banq’s Bankruptcy Case, Calls it a “Bad Faith” Tactic

A US judge has dismissed crypto neobank Banq’s bankruptcy case.

Background

• The firm filed for Chapter 11 bankruptcy in June last year in the district of Nevada
• The Judge branded the whole stunt to be a "bad faith" tactic
• She said it was set to motion to “gain an advantage in pending litigation”

Why should you pay attention?

• The ulterior motive of the bankruptcy filing was to shield Banq and its founder, Jon Jiles, from an investor lawsuit launched by N9
• N9, in its turn, is a key creditor of the firm with a $3 million stake
• The suit claims that Jiles prioritized Prime Trust's interests — he was the founder and managing member there too — over Banq’s
• The executive ultimately used his control powers at Banq to help benefit Prime Trust
• That ultimately paved the path to Banq's downfall

Who said what?

• The judge wrote,

“It is apparent from the totality of the circumstances that Debtor’s actual purpose in filing this case is not to successfully reorganize”

• Judge Natalie Cox further claimed that Banq's bankruptcy plan was not a legitimate business reorganization
• This was because, she pointed out, the firm had no revenue streams

Zooming out

• The case was ultimately crafted to hinder the ability of N9 to go after Jiles for breach of fiduciary duty
• She concluded,

"In essence, this case appears to be filed as a litigation tactic to advance the self-interest of the Jiles parties”