Earlier this week trading of LMB Holdings bitcoin shares were halted, after an apparent request filed by the company. LMB Holdings is the parent company of Neo & Bee, an innovative bitcoin firm which recently set up shop in Cyprus. The stocks were traded on the Havelock Investments exchange. In a statement posted on Havelock Investments on Monday, the exchange said it was formally informed by Neo & Bee that there “may be a high possibility of questionable trading activity”. Therefore Havelock Investment halted trading, awaiting further instructions from Neo & Bee. The unusual move caused a fair amount of concern, which is hardly surprising in light of recent developments, namely the failure of Mt. Gox.

The plot thickens

Neo & Bee did not issue a public statement explaining the decision to halt trading, nor did Havelock Investment offer any further details. Neo & Bee CEO Danny Brewster was not in Cyprus at the time and this fact created a lot of buzz on various public forums, as people started to question Neo & Bee’s liquidity. Brewster confirmed that he is not in Cyprus, but he stressed that he is away on business and that he is working to resolve “big issues” which were only compounded by people spreading allegations online. On Wednesday morning Brewster posted a lengthy explanation of his predicament on The Bitcoin Talk forum. He confirmed that he was not in Cyprus and stressed that he left temporarily, without taking any money or bitcoins. Brewster said his silence was “forced due to the actions of two people” including one forum member, who posted false information about his life and family. “Those posts had much wider ramifications than they probably assumed they would have, so I hold them partially responsible for what has occurred since their posts,” wrote Brewster.

“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.”

The last bit is perplexing, as it seems that Brewster might have had a falling out with key staff members.

Why did Brewster leave Cyprus?

Brewster insists that his decision to leave Cyprus was business-related and nothing more. “My reason for leaving was to raise additional capital for the business through the sale of my equity as we had run out of liquidity, I had exhausted all of my own liquidity, too, through directors loans to the company. Every single bitcoin raised and spent is accounted for, any claims of embezzlement are nothing but empty claims with no foundation,” he said. However, Brewster admitted the loss of bitcoins due to the closure of BitFunder/WeExchange, but he pointed out that he personally assumed that debt of 1,402BTC in order to protect the company. Brewster continued:

“UKYO also owes me an additional 260BTC separately from the 1,420BTC. I also have 369.8BTC of my own Bitcoin stuck with Mt. Gox that would have been given to the company to settle all creditors and continue operations whilst more capital was raised. Having funds on Mt. Gox was a personal risk that I assumed and no company funds were ever held on there.”

Original recovery plan derailed

Brewster claims his plan was to raise more capital through the sale of some of his assets, but that he was forced to change his plans as soon as threats were made towards his daughter. Following the threats, he decided to sell all of his equity and allow the new owner to appoint a new CEO. Brewster then outlined his backup plan:

“The whole process will be completed and handled through an agency that specializes in these matters, once the final details are completed, the agency details will be made available to interested parties who wish to purchase 100% of my equity in LMB Subsidiaries Ltd thus taking full control of all subsidiaries. I shall also be providing the new owner full rights over the Bitcoin debts currently owed by BitFunder/WeExchange as I know people are working on a solution to recovering those debts for everyone that has funds stuck there. 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.”

He went on to say that his biggest mistake was using BitFunder/WeExchange during the fundraising process. Had he not had to cover the losses incurred due to the BitFunder failure, Brewster says he would have enough capital to cover all creditors and OPEX for the foreseeable future. “I am working towards having this entire process completed within a short period of time to enable the business to recover, to ensure that those invested do not lose out following this process,” 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.”

The end of the road?

Neo and Bee was endorsed by several high-profile figures and had received a largely positive response from the bitcoin community upon its launch in Cyprus. The company emphasised security: holding full bitcoin reserves, KYC and AML compliance, as well as top notch multisig cold storage. On the other side of the spectrum, it also had an expansive advertising campaign working to target mainstream consumers rather than bitcoin enthusiasts. If Brewster manages to secure capital or find a buyer for his equity, Neo & Bee could survive, albeit under new management. However, for the time being it appears that his plans are on hold, at best.

Insolvency sign image via Shutterstock