BlueHippo Funding, the Woodlawn electronic sales company recently accused of violating its settlement with the Federal Trade Commission, has filed for bankruptcy court protection.
The company said it was forced to file for protection under Chapter 11 on Monday after its payment processor's bank, First Region's Bank, unexpectedly froze funds belonging to BlueHippo.
"First Region's Bank explained in an e-mail that it was freezing BlueHippo's accounts solely as a result of a recent press release issued by the FTC - a press release that is replete with factual inaccuracies," BlueHippo said in a statement. The company said it believes the bank's actions were unlawful and left BlueHippo unable to pay its creditors. BlueHippo added that it has demanded that its funds be immediately restored.
BlueHippo, owned by Joseph K. Rensin, caters to consumers with poor credit and few financing options. The six-year-old company says it helps people buy computers and other electronics on layaway, promising to ship merchandise once consumers make a certain number of consecutive weekly payments.
But regulators in multiple states and thousands of consumers have accused BlueHippo of not living up to its end of the deal, claiming the company uses deceptive practices, overcharges for electronics and doesn't deliver the goods as promised.
Maryland regulators reached a settlement with BlueHippo in 2007, in which the company ended up paying $3.5 million in restitution. BlueHippo no longer does business in the state.
In 2008, the FTC settled with BlueHippo, which agreed to pay another $3.5 million in restitution. But earlier this month, the FTC asked a court to find BlueHippo in contempt, saying the company continued to rake in millions from customers yet failed to ship computers to most as agreed.
In the company's bankruptcy petition filed in Delaware, BlueHippo claims assets and liabilities are each in the range of $10 million to $50 million.
Among the 20 largest creditors, first on the list is the FTC because of the ongoing litigation with the regulator. The FTC is seeking refunds and compensation for customers, an amount that could surpass $20 million.
BlueHippo also reported that it had invoiced sales of $33.1 million in fiscal year 2008 and $21.5 million for a partial year ending Sept. 30. The company lost $1 million last year and $1.8 million for this partial year.