Flooz to File Bankruptcy; Victim of Credit Card Fraud
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Unable to secure a merger partner and burned by what it described as "dramatic changes in capital markets," alternative currency play Flooz.com has shut down and plans to file for federal bankruptcy protection by the end of this week.
Official word of the company's demise came just two weeks after Flooz took its online currency market offline and announced it was actively pursuing a merger partner.
Company officials did not return calls this morning to expand on a short note posted on the home page which said simply: "We regret to inform you that Flooz.com, Inc. has ceased operations. The offices are closed and the company will file for bankruptcy protection. Flooz.com has been adversely affected by dramatic changes in capital markets and the general slowdown in the economy. Flooz.com had been in merger discussions with a number of companies but was unable to find a suitable partner."
However, a report in Monday's New York Times said the company was unknowingly victim to credit card fraud from thieves in Russia and the Philippines.
It said stolen credit card numbers were used to buy the online currency at the Web marketplace and used to purchase goods at online stores that accept the "flooz" money.
"Flooz.com's credit card processing company...also alerted the company about the fraud, after the Flooz.com charges showed up on the monthly statements of people whose credit cards, or card numbers, had been stolen," the newspaper said.
"To cover any future refund requests from those credit card customers, the processor withheld daily reimbursements to Flooz.com from credit card sales and froze other accounts until it held $1 million of Flooz.com's money by the second week of August," the story continued, quoting a source close to the company.
The company source said the cash flow situation became "untenable" because customers were still redeeming thousands of dollars' worth of "flooz" daily at online merchants.
The demise of Flooz comes as chief competitor Beenz.com was preparing to shutdown on August 26.
Beenz raised more than $80 million in four separate funding rounds while Flooz burned through approximately $50 million in venture capital backing.