Laundry Room Chronicles: Chatting Canopy Financial

My weekly video spot with Reuters was focused on the situation at Canopy Financial, which yesterday filed for fraud-induced bankruptcy protection. Per usual, I’m taping just a few paces away from the home office:

Deb posted the bankruptcy filing here, which listed between $1 million and $10 million in assets and between $50 million and $100 million in liabilities. She also posted an attached declaration from Canopy Financial lawyer Dan Stevenson. In it, we get a bit of clarification on some key issues:

  • Canopy Financial raised $75 million in Series D funding over the summer (two tranches), compared to the $62.5 million that had been previously reported. That brings its total VC capitalization up to over $100 million.
  • Over $39 million of that amount was used to buy back shares from existing investors. Granite Global Ventures is not specifically named, but previous reports have said that it at least partially cashed out on the round.
  • Stevenson confirms that Canopy discovered that financial statements provided to its investors and lenders were “fraudulent, and also uncovered other significant financial and accounting regularities.”
  • These inaccuracies represented a MAC under its loan agreements and certain customer agreements. The lenders have already assumed control of a Canopy bank account worth over $5 million, and certain customers have canceled their accounts.
  • Canopy laid off all but 31 of its 123 full-time employees.
  • Stevenson says that the company blames two officers for the fraud, but does not name them. We believe that they are company president Jeremy Blackburn and chief technology officer Anthony Banas.