Bitcoin mining hardware manufacturer HashFast has avoided being forced into involuntary Chapter 7 bankruptcy proceedings by signing a deal with its creditors.
Under the deal, signed in a federal bankruptcy court in San Francisco, HashFast will commit to an accelerated restructuring in order to meet its obligations. Mining company Liquidbits sought court approval last week for HashFast to enter an involuntary bankruptcy in order to recoup funds lost after HashFast failed to deliver on a $6m order.
Ars Techina reported that HashFast is now able to resume part of its business. However, the bankruptcy court placed restrictions on the manner in which the company can sell products in keeping with previous agreements struck during arbitration.
The court order read:
“Subject to the other provisions of this Paragraph 2, HashFast may operate only in the ordinary course of its business.”
Permission to sell inventory
US Bankruptcy Judge Dennis Montali gave HashFast the go-ahead to begin selling some of its mining chip inventory, up to 1,000 units, as a way to raise funds. As part of the agreement, the company can raise no more than $100,000 by this method.
The court order also stipulated that the company’s creditors may grant future approval for more chip sales.
HashFast has provided its creditors with pricing figures for the products it intends to sell, and must abide by an agreement to not sell them for any more than the agreed-upon amount. The court also said that HashFast’s creditors must keep this information in strict confidence.
HashFast to hire chief restructuring officer
HashFast has agreed to hire an outside counsel to serve as chief restructuring officer during the process. Any candidate is subject to approval from the company’s creditors, the court said.
According to Ars, HashFast has reportedly retained the services of an attorney from the Brincko Group, a law office specializing in corporate restructuring and bankruptcies. The company’s lawyer also noted that this person has already been brought onto the team to help begin the restructuring effort immediately.
The court decision represents the first hint of a turnaround for the company, which in March had its bitcoin wallets frozen.
For months HashFast has been dogged by customer complaints and allegations of fraud. In early May, the company announced that it was firing 50 percent of its staff, saying the layoffs were a result of a business model restructuring rather than preparations for possible bankruptcy.
Bankruptcy court image via Shutterstock