Amp’d Bankruptcy: Verizon Played Key Role In Timing; Threatened To Shut Off Service

Verizon played a key role in Amp’d Mobile’s decision to file for bankruptcy late Friday — and the timing, according to an affidavit by Bill Stone, president of Amp’d Mobile, filed Monday in federal bankruptcy court in Delaware. The affidavit is meant to support various motions that would allow the company to continue operating without interruption. Keep in mind: this is the Amp’d side of the story.

Stone’s sworn affidavit proffers an outline of events that show a company growing too fast in too short a time without the right systems in place. After a growth spurt in late 2006 and early 2007, Amp’d wound up with a large number of new subs — the sub total hit 100,000 by the end of 2006 — and, within months, an equally high number of non-paying customers (approaching 80,000 by late May) leading to what Stone describes as a “liquidity crisis.” That problem led to fund-raising efforts in May that “appeared to be successful” even as late as June 1, the day the company filed for bankruptcy. But, Stone adds: “Unfortunately, the Debtor’s existing investors ultimately declined to further fund the business.”

While that was ongoing, Amp’d’s network carrier Verizon — listed as the top creditor with $33 million owed — declared default on its wholesale agreement May 22 and gave Amp’d 10 days to make a $4.5 million payment. Unable to pay, the board agreed to file bankruptcy June 1. (For context, the filing doesn’t say but that payment was a little above 1 percent of the total funding and financing the company had raised.)

That’s when Verizon, according to Stone, made a move “in direct contravention” of the wholesale agreement and the default notice, sending a letter the evening of June 1″‘purporting to terminate the wholesale agreement effective immediately'” and asserting the right to shut off service to Amp’d customers. Amp’d will ask the court to make sure the agreement remains in force and that service continues.

The first hearing is Tuesday at 2 p.m. in Wilmington; U.S. Bankruptcy Judge Brendan Shannon has been assigned the case.

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