Identity verification startup Jumio files for bankruptcy, will sell assets to early backer Eduardo Saverin

Jumio, the Andreessen Horowitz-funded mobile and online credentials authentication business, whose technology can scan and read information from payment cards and IDs, says that its U.S. business has begun voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court, which will allow it to sell its assets. The company is selling its business to early backer and Facebook co-founder Eduardo Saverin.

Saverin has formed an entity called “Jumio Acquisition” to buy these assets, and is also providing the startup with $3.7 million in financing to support its ongoing operations.

The company says that it reached this point because it was unable to secure additional funding due to “certain legacy issues combined with related government investigations and proceedings,” but did not go into further detail.

The $3.7 million, meanwhile, is being provided as “debtor-in-possession” financing at a rate of 4% per annum, a company announcement states. This will also allow Jumio to continue its operations throughout the sale process. However, the asset purchase agreement is subject to better offers, so it’s not guaranteed that Jumio Acquisition will prevail until the court-supervised auction completes.

Jumio’s non-U.S. subsidiaries are not included in the court filings, but will be a part of the business’s sale.

“The fair and orderly process announced today will allow Jumio’s new management and its employees to continue to serve its top-tier customers and to realize the company’s potential,” Saverin said in a statement. “With the company’s future operations in good hands, Jumio Acquisition is pleased to make this stalking horse bid to facilitate an orderly transition to a promising future for Jumio.”

In addition, Jumio has retained Landis Rath & Cobb LLP as legal advisor; Sagent Advisors LLC is serving as financial advisor; and Ernst & Young Capital Advisors LLC is serving as restructuring advisor, as part of this process.

Company CEO Stephen Stuut optimistically stated that this is not the end for Jumio, but rather a necessary move that will allow it continue. “…our underlying business remains exceptionally strong,” he said. “The court-supervised sale and restructuring process will allow us to strengthen the Company’s financial structure and extend our leadership position in ID verification.”

Jumio was a once a much buzzed-about startup for its interesting and useful technology that would allow users to hold up their payment card or ID to a webcam or mobile phone’s camera to instantly have their card identified, or the credentials validated. The idea was that this could not only cut down on the friction involved with entering in this data online or on mobile forms, but could also help reduce fraud.

However, it competed with similar technologies like, which PayPal purchased, and more recently it was impacted by the launch of Apple Pay which made mobile checkout more seamless. (Jumio tried to counter this with its BAM Checkout service, for example.) The company still touts a number of clients on its website, however, including United Airlines, Airbnb, EasyJet, Gyft, Mr. Green, betfair, and others.

The company appeared to have been facing troubles for some time – the company last year swapped CEOs after examining its books. Founder and CEO Daniel Mattes was ousted after what may have been possible financial irregularities, Fortune had reported. Jumio also acknowledged the it had hired outside auditors though didn’t find anything out of the ordinary.

Jumio had raised nearly $37 million in outside funding, according to CrunchBase, prior to today’s news.