Marlborough Tech Firm In Bankruptcy Mess | Court appointed trustee seeks asset sale to pay off creditors of Cyphermint Inc.
Several creditors are trying to force the liquidation of Cyphermint Inc., a Marlborough-based mobile payment system maker, according to documents filed with the U.S. Bankruptcy Court for the District of Massachusetts.
And a trustee appointed by the court, Joseph Baldiga, a partner at the Worcester-based law firm of Mirick O’Connell, is in the process of putting together a management agreement to run the company until it or its assets are sold in bankruptcy court.
Baldiga told the Worcester Business Journal that he has found paperwork at the company that shows a number of its directors and executives took substantial amounts of money — “hundreds of thousands dollars” — out of the firm in March and April, weeks before the company’s local operations shut down. He filed with the bankruptcy court asking that representatives from the company provide a list of its assets, liabilities, income, expenditures and creditors.
The executives and directors named in the motion are: Joseph Barboza, president, treasurer and director; Ivan V. Kuznetsov, clerk and director; Robert J. Bowdring, CFO; Anton Emelyanov, director and Victor L. Dostov, director.
Barboza was present at a bankruptcy hearing in Worcester last week, but declined comment for this publication. Several messages left at the Marlborough headquarters seeking comment for this story were not returned. The WBJ also sent e-mails to the company’s Russian operations, but did not receive a response.
Cyphermint’s software — which lets users pay bills through their cell phones and through self-service kiosks — was created in Russia during the country’s banking crisis in 1992. In 2000, engineers who had developed the mobile payment software at Alkorsoft, a Russian company in St. Petersburg, came to the states and headquartered operations in Marlborough to begin a U.S. expansion.
Despite its promising technology, the company sputtered, finally laying off its local employees by April.
Contingency Plan
Baldiga said there will be a management agreement with interested parties that will allow the company to operate for 30 days while he remains a trustee. There are several companies that have expressed interest in buying Cyphermint or its assets, he said, although he could not name them until he files additional paperwork with the court.
“That’s a homerun for the creditors,” he said of the sale and the possible return of money removed from the company this spring.
According to the involuntary bankruptcy petition, filed on Aug. 21, the company owes almost $110,000 to three companies. The largest chunk of change is $97,690 owed to Winchester-based Sheffield Corp., a financial services company that also works on finding venture capital for companies. The other debtors include High-Grade Cleaning Service Inc. of Hudson which claims a debt of $9,958 and MetroWest Printing of Marlborough which is looking to collect $1,250. However, Baldiga said the company’s list of debtors extends well beyond those three firms.
David Nickless, the lawyer who filed the Chapter 7 petition for the three creditors, said his main contact was with the Sheffield Corp. and High-Grade Cleaning Service. He received a phone call from those two firms asking him to take the case. He is a partner in the Fitchburg law firm of Nickless and Phillips PC.
Nickless said he asked the court to appoint a trustee to the case because a sale of Cyphermint’s assets was in the works, and the creditors wanted to make sure any assets stayed in the U.S. That sale fell apart, Nickless said.
Cyphermint’s financial problems apparently stemmed from the failure of several promising projects, said a former employee who asked to remain anonymous. The company devoted a lot of its money and software developers to a kiosk system that was to be installed in 7-11 convenience stores across the country, according to the employee and the company’s press releases. The kiosks were supposed to let people pay bills, get money orders and allow people to buy things like flowers and CDs. The project didn’t take off for a variety of reasons, according to the employee, and other projects didn’t pan out either.
Promising Deal
One recent light of hope for the company came in February, when it announced a deal to provide its kiosks to thousands of Walgreens retail stores nationwide where DHL will offer its services. The Walgreen kiosks were in addition to 900 kiosks that Cyphermint powered at OfficeMax locations.
The company, through its interim management, will keep servicing the DHL contract, Baldiga said.
The failure of its products to take off led the company to lay off some of its workers in March. The final layoff of 20-plus employees took place at the end of April, according to the employee.
Another former employee, Paul Creme, once Cyphermint’s vice president and general counsel, would not comment except to say he was let go by the company in April. Creme is an attorney at Prince, Lobel, Glovsky& Tye LLP in Boston.
Representatives from High-Grade Cleaning Service and MetroWest Printing creditors said they tried to get the bills paid, but were unsuccessful.
Irondina Chven, co-owner of the cleaning company, said she stopped cleaning Cyphermint’s offices in July because she hadn’t been paid her for several months, despite a daily cleaning schedule.
“I asked them if they wanted to have us clean just once or twice a week until they got back on their feet, but he said, ‘No, we’re fine,’” Chven said. “He (CEO Robert Bowdring) said, ‘Just hang in there, we’re going to be fine.’”
Lindsay D’Amato, of MetroWest Printing, said Cyphermint had been a customer since 2000, then recently ordered supplies, but did not pay for them despite calls to the company.
The company had mostly Russian investors. In 2001, Sergey Bodrunov, a general director at one of Russia’s defense companies, Airspace Equipment Co., announced he was investing $10 million in Cyphermint Inc. He also served as a company director.
In February of this year, the CEO at the time, Joseph Barboza, said publicly that the company was gearing up for growth and was in the process of closing on $5 million of a $12 million Series A round of financing, but it isn’t clear if the company ever actually received the money.
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