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Tuesday, November 5, 2013
Bitcoin Firm Files for Bankruptcy
Per The Wall Street Journal:
ROBIN SIDEL and
Nov. 4, 2013 7:04 p.m. ET
A three-month-old company with ties to one of the biggest promoters of the virtual currency bitcoin has filed for bankruptcy protection with less than $50,000 in assets.
Alydian Inc., a unit of CoinLab Inc., on Friday filed for Chapter 11 protection in U.S. bankruptcy court in Seattle. The 10-page court filing didn't disclose why Alydian filed for bankruptcy or how it hopes to repay its debts.
CoinLab is a bitcoin start-up run by Peter Vessenes, who is also chairman of the Bitcoin Foundation. The foundation is essentially a nonprofit trade group that has gained attention in recent months for promoting bitcoin and supporting new rules aimed at making it more accepted.
CoinLab is one of the best-known names in the fledgling virtual-currency industry, describing itself as a "bitcoin business incubator." It has won credibility because it has attracted funding from venture capitalists such as Silicon Valley's Draper Associates, which pumped $500,000 into the company last year.
Mr. Vessenes, who signed the bankruptcy petition, couldn't be reached for comment. Alydian's bankruptcy attorney also couldn't be reached. A spokeswoman for the Bitcoin Foundation declined to comment.
CoinLab announced the formation of Alydian in August, touting it as "its newest portfolio company" that would develop bitcoin-mining solutions for customers. "Mining" is the term used to describe the computer-generated creation of the virtual currency. The filing doesn't include Coinlab.
Unlike dollars or euros that are backed by a central bank, bitcoin users trade the currency on a number of exchanges or swap it privately. Some merchants also accept bitcoin as payment for goods and services.
Bitcoin trading has been on a rollercoaster this year. The currency nearly quintupled earlier this year, leaping from roughly $50 in mid-March to $230 in April. It traded at about $100 in August, but was fetching $237.50 in Monday trading on the Tokyo-based Mt.Gox exchange.
Federal and state regulators have been cracking down on bitcoin transactions and pushing companies to follow comprehensive anti-money-laundering requirements just like traditional money-transmission businesses such as Western Union Co.
CoinLab, which is based in Bainbridge Island, Wash., has registered as a money-services business with the Financial Crimes Enforcement Network, a unit of the Treasury Department.
Alydian said in court papers that it owes $600,000 to CoinLab Inc. It also listed $3 million in debt to New Zealand's XRay Holdings LLC and $40,000 in debt to Mr. Vessenes.
The filing was made in the name of Alydian affiliate CLI Holdings Inc.