In February, the world’s first “bitcoin bank” Neo opened to much fanfare in Cyprus. Barely a month later, the stock price is in the gutter, stock trading on Havelock has been halted due to “unusual activity,” the company’s offices in Cyprus are shuttered, and CEO Danny Brewster is no longer in the country. There has been no official statement from Neo, and no activity on their Facebook or Twitter accounts for nearly two weeks. What happened?
The mystery was resolved today when Brewster took to the popular Bitcoin Talk forum to post an extensive update on the situation at Neo & Bee. (Bee is Neo’s payment platform). Noting that his silence was “forced” to do the actions of two unnamed people on the site, Brewster said he holds them “partially responsible” for the recent problems. He then addressed the reasons for that silence, and for his departure from Cyprus.
I left Cyprus on a short term temporary basis for reasons that will follow, I haven’t shipped anything from Cyprus and I certainly haven’t run away with company or peoples money or bitcoins. Following those posts on the forum, I received direct threats targeted directly at my daughter, they have been reported to the relevant authorities, Once those threats were made I took the advice to remain outside of Cyprus and remove contact with anyone that could be responsible for the threats, this included not speaking with members of staff that could be responsible.
There’s more to the story that threats, however. Brewster notes that Neo & Bee had “run out of liquidity,” forcing him to use his own funds to prop the company up. He noted that situation was caused by the failure of defunct funding platform BitFunder/WeExchange, resulting in the loss of 1,420 BTC which he covered from his own funds. Brewster also says he lost 369 BTC of personal funds on Mt.Gox, although he insists that no company funds were ever held at the failed exchange. With the price of bitcoin crashing, however, the cost of running the Neo operation soon became a huge problem.
My original plan was to raise more capital to allow the company to achieve its potential through the sale of some of my equity. The moment threats were made towards my daughter this plan changed and I decided I would sell all of my equity, allowing the new owner to appoint a new CEO.
Brewster said that the sale of Neo & Bee will be “handled through an agency that specializes in these matters,” and that he will give up his entire stake in LMB Holdings (Neo & Bee’s parent company). He noted that “This process will also write off all directors loans I have made to the company and I shall not receive any financial compensation through this sale process.”
In an attempt to ease concerns about funds being embezzled, he said:
I apologize for my silence but I would like to reiterate that ZERO customer funds are under my control and none have been lost or used for business purposes. My decisions are based on what I deem to be the best option for my family.
With the bitcoin world still heavily shaken due to the Mt.Gox fiasco, Neo & Bee was seen as part of a new, more accountable and professional generation bitcoin companies. More on the story as it develops.