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In a dramatic turn, ProPhase Labs Inc. placed three of its affiliates into Chapter 11 bankruptcy protection Monday in New Jersey, listing combined liabilities topping $13 million. The move comes as the biotech company simultaneously flirts with an unusual escape route—betting on cryptocurrency accumulation instead of traditional financing.

The filings show that ProPhase Diagnostics Inc. and two sister affiliates in New York and New Jersey disclosed liabilities of $2.3 million, $11 million, and $465,000, respectively. The petitions offered little detail on the rationale behind the bankruptcies.

From DNA Sequencing to Digital Coins

According to its website, ProPhase develops genome sequencing tools, diagnostics, and dietary supplement platforms. But instead of leaning on fresh capital raises, the company is eyeing crypto as a long-term play.

“We believe there’s significant underlying value in ProPhase, potentially multiples of our current market cap,” CEO Ted Karkus said in a statement. “That’s why we canceled our equity line of credit—we have no interest in diluted financing. Instead, our crypto treasury strategy should be accretive for shareholders.”

A Market Slide and a Crypto Gamble

Shares of ProPhase Labs trade on the Nasdaq, hovering near 40 cents Monday—down sharply from nearly $14 in 2022. The firm’s market capitalization now stands around $16.7 million.

ProPhase is betting that a pivot to digital assets may bolster its position. Last week, the company revealed in an SEC filing that it had hired ThinkEquity LLC as exclusive strategic adviser and investment banker for its crypto treasury strategy.

The $50M Threshold

Under that agreement, if ProPhase accumulates $50 million worth of cryptocurrency, ThinkEquity gains the right to appoint a director to ProPhase’s board and receive warrants to purchase shares, according to filings.

It’s a high-stakes gamble: at a time when liabilities loom, ProPhase is effectively wagering that digital coins could prove more valuable than conventional financing.

Counsel and Silence

ProPhase did not immediately respond to requests for comment on the filings. The company is represented in its bankruptcy proceedings by attorney Thaddeus R. Maciag of Maciag Law LLC.

As the headlines swirl, the story of how ProPhase filed for Chapter 11 while simultaneously chasing a crypto future underscores a paradox: a biotech firm straddling the worlds of genome sequencing and blockchain speculation, fighting to redefine its survival strategy.