Banq filed for bankruptcy last year, and it was stated that this application was made to protect the company and its executives from lawsuits filed by a creditor. Jon Jiles, chairman of crypto neobank Banq, has been sued by a creditor called N9.

The case is based on allegations that Jiles failed to fulfill its fiduchiari obligations. N9 has a $3 million stake in Banq and claims that Jiles put Prime Trust’s interests ahead of Banq’s interests.

The court considered Banq’s bankruptcy filing as “bad faith” and stated that this filing was used as a tactic by Jiles and the company to avoid the lawsuit initiated by N9.

Judge Natalie M. Cox stated in her decision that this bankruptcy process was not a real business restructuring attempt, on the contrary, it aimed to protect Banq and Jiles from investor litigation. “Jiles quickly demonstrated that his loyalty lies with Prime Trust,” N9’s lawsuit said.

N9’s allegations include that Jiles, as chairman of Banq, failed to enter into a non-compete agreement with former CEO Scott Purcell.

N9 states that this agreement was made solely between Purcell and Prime Trust and that Jiles used his control over Banq to the benefit of Prime Trust. N9 claims that Jiles’ actions caused Banq’s collapse.

Banq accuses Purcell of transferring $17.5 million in assets and technology to a rival company he founded, Fortress NFT Group, after the company shifted its strategy from crypto payments to NFTs. This is at the center of Banq’s bankruptcy claims.

Judge Cox stated that Banq’s bankruptcy plan could not be considered a legitimate business restructuring because the company had no sources of income.

“When we look at the totality of this case, it is clear that the Debtor’s true intent in filing this case was not to successfully restructure,” Cox said, noting that Jiles financed the bankruptcy with a $225,000 loan.

Cox stated that this lawsuit was aimed at preventing N9 from pursuing Jiles for breach of duty. “At its core, this lawsuit appears to have been filed as a litigation tactic to advance the interests of the Jiles parties,” he said.

Judge Cox noted that this case was not a true bankruptcy case but was considered a dispute between Banq, Purcell and Jiles. This makes the legal battle facing Banq and Jiles more complicated.

This decision of the court once again brought to the agenda the purpose of bankruptcy laws and how to protect against malicious applications. While Banq’s future remains uncertain, the legal consequences that Jiles may face may affect the company’s reputation and financial situation.