Business

Steve Kaaru

Overstock-backed Bankorus has ‘run out of cash’

Blockchain-powered banking platform Bankorus has reportedly run out of cash. This is according to the largest shareholder, Sonic Zhang, who, in a blog post, revealed that despite receiving over $10 million from investors, the Beijing-based startup has no money to even pay the employees’ salaries.

Bankorus grabbed headlines earlier this year when Medici Ventures, a subsidiary of American public traded ecommerce company Overstock, acquired a 5% stake in the company. The startup, which was to focus on lending, custody and asset exchange on the blockchain, promised to unlock traditional assets held by high net worth individuals and move them to crypto.

However, this appears to be just a pipe dream. In his post, Zhang revealed that the startup ran out of cash after the second round of investors pulled their funds. The investors had been convinced that by investing in Bankorus, they would get an influential management position in Rato Credit Union, a Lithuanian credit union which Bankorus had invested in.

Zhang stated, “And Bankorus didn’t have enough support from the board and management to have control. This has disappointed the new investors who signed convertible loan agreements for the investment and decided to pull out.”

He further reveled that all Bankorus employees have left, including its founders. One of the founders, Gregory Van den Bergh is reportedly seeking other jobs so that he can support his family. All that’s left of the startup’s capital is the €1 million investment into the Rato deal. Investors in Bankorus could get private shares in the credit union after conversion.

Bankorus had planned on issuing an initial coin offering in 2018, Zhang further revealed. However, at the time, the then Overstock CEO Patrick Byrne convinced the founders to instead issue security tokens which would give their investors real rights in the startup. Byrne reportedly convinced them to launch the security tokens on tZero, a security trading platform owned by Overstock.

There is some hope for investors in the Rato deal, however. According to the post, Zhang has already talked to the CEO of Rato and expects they’ll strike a deal soon which will enable the investors to own a part of the credit union. He urged the investors to be patient and not pull out of the Rato deal “because I think waiting for the bank to be converted is the best option, pulling out now means all efforts will have been wasted and it becomes a sure loss for all the investors.”

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