Zango CEO filed for bankruptcy

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adotas_small_011.jpgADOTAS — As I said yesterday it was not a complete surprise that the online media shop ran aground since it had already gone through rounds of layoffs amid a worsening advertising climate.

But the surprise is in the details. According to the Seattle Times, aside from owing banks $44 million, Zango was on the losing end of a $4.6 million lawsuit in January from a former employee who said he was owed money.  Apparently, that and the banks moving to foreclosure forced co-founders Keith Smith and Daniel Todd to declare bankruptcy at the end of March.

“The bank’s action is not all that hard to understand as Zango is in default on debt to … the banks (a consortium comprised of KeyBank, Silicon Valley Bank, and Comerica Bank) in excess of $44 millon,” Smith, the company’s CEO said in the filing. “They have a first-position secured interest in all of Zango’s assets, have formally declared Zango’s debt in default and in a demand letter dated March 10th informed Zango that they will not provide any further financing or extend their voluntary forbearance unless they are paid in full or there is a firm purchase and sale commitment in place for Zango’s assets on terms acceptable to the them within the next couple of days.”

According to the Times, the banks foreclosed on Zango last week and sold about 10 percent of the assets, to Blinkx, the video search engine.  According to Blinkx, all Zango employees were laid off, about 90 people, though it seems unclear.

Zango’s site is still functioning as of this morning, offering free videos, games and music to people willing to let Zango install ad software on their computer. According to it’s website, Zango had raised more than $150 million in debt and equity financing and successfully integrated five mergers and acquisitions. Phones calls for comment have not been returned.

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