Storj Labs Files for Chapter 11 Amid Crypto Industry Woes

Decentralized cloud storage firm Storj Labs has filed for Chapter 11 bankruptcy in West Virginia, citing legacy obligations from an earlier period. The company will continue to operate and provide services without interruption, according to its director of software engineering, Kaloyan Raev.

The restructuring plan proposes sharing ownership of the reorganized company among management, investors, and token holders, which is a rare provision in bankruptcy proceedings. Token holders normally have no legal claim on an issuer and receive nothing in a Chapter 11 process.

Storj's STORJ token fell by 16% to about 6 cents following the announcement. The company was acquired last year by Inveniam, which endorses the reorganization and continues to support it. Storj is disposing of previous acquisitions and non-essential operations to address its legacy obligations.

The filing caps an unusually heavy week for the crypto industry, with BitMEX and BitMart announcing solvent wind-downs and Movement Labs seeking Chapter 11 protection. The company's management says that the business underneath is strong but has been hindered by these legacy issues.