Crypto Bank Banq’s Bankruptcy Application Rejected by US Judge

Crypto neobank Banq, which filed for Chapter 11 in a US bankruptcy court in Nevada, has had its application rejected.

The bank’s bankruptcy filing was called a “bad faith” tactic by Judge Natalie M. Cox, who presided over the case, to avoid reorganization and “gain advantage in pending litigation.”

In his ruling, Judge Cox found that this bankruptcy case had exposed Banq and its founder, Jon Jiles, to a lawsuit initiated by N9, a major creditor with a $3 million stake in the company, in which Jiles had breached his fiduciary duties by prioritizing Prime Trust’s interests over Banq’s. He wrote that it was to protect himself from a lawsuit from an investor who claimed that he did not bring it.

“Jiles quickly made it clear that his loyalty was to Prime Trust, not Banq,” the N9 lawsuit said.

Judge Cox stated that Banq’s bankruptcy plan was not a legitimate restructuring because the firm had no source of income. Instead, he explained, the application was “almost entirely” about litigating against Purcell the company’s business operations.

“It is clear from the totality of the circumstances that the Debtor’s primary intent in filing this lawsuit is not to successfully reorganize,” Cox wrote, noting that Jiles financed the bankruptcy proceedings with a $225,000 loan through his company, NVF LLC.

In short, Cox thinks the case is a dispute between Banq, Purcell and Jiles and not a bankruptcy case.