Bitcoin Forum

By Robin Sidel and Katy Stech
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.

What is this a bitcoin run?

I wonder if the Jacobson Brothers backing HashTrade who pre-ordered Monarchs with a $1M down payment read the news.

I love this comment:


Almost akin to Jean-Marc Jacobson donating a building in Montreal to himself to house the Bitcoin Embassy.

The Montreal Bitcoin Embassy was first announced on bitcointalk.org around the middle of June and they successfully secured a building in a beautiful section of Montreal and held a meetup 2 weeks ago. (http://bitcoinmagazine.com/6699/an-interview-with-the-executive-director-of-the-montreal-bitcoin-embassy/)

We've been mining for a while at BTC Guild, but thought it was time to come out of the closet.

The deal's not in trouble.

We've moved a few key customers over, will announce more information soon.

So, to summarize we got a guy who cant run a business without filing for bankruptcy running The Bitcoin Foundation.

And he is now hidden at the bottom of the foundation board page. At least that.

I never knew that pretending something does not exists was a good thing.

I might just be way out of the loop, but this is the first I've heard of Alydian.

Also, I never seem to hear anything about CoinLab other that its deal with Mtgox.

Why don't these companies do something on their own rather than tearing up other businesses?