Biotech firm files Chapter 11 bankruptcy for 3 labs, explores crypto plan

ProPhase Labs Inc. (Nasdaq: PRPH), a biotech firm with plans to build a crypto treasury, announced on Sep. 23 that its three COVID-19 testing lab units have filed for reorganization under Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey.

The bankruptcy action is "strictly" limited to the COVID-19 testing lab units which are collectively owed tens of millions of dollars by insurance companies, the statement read.

The goal of the bankruptcy filing is to accelerate recovery of funds that ProPhase Labs believes were lawfully owed for its testing services.

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“Filing the lab subsidiaries in bankruptcy court was the critically important next step that we have all been waiting for," said Karkus. "The Crown Medical Collections group of attorneys will now directly approach these insurance companies with litigation and the potential for early settlements."

The attorneys have estimated cash collections worth $50 million or more for the company net of all legal and contingency fees, he added.

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On Sep. 9, the firm's stakeholders approved all the proposals, including one to pursue a potential crypto treasury strategy to enhance stockholder value, diversify the corporate balance sheet, and grow the company’s current subsidiaries.

The firm recently said it is continuing to explore the possibility of investing in digital assets.

“Following our stockholders’ approval of all proxy items at the September 9 Special Meeting, ProPhase is now positioned to advance its crypto treasury strategy... we are working on a crypto treasury strategy with a goal that it will be structured to be accretive to current shareholders given the significant underlying value of the Company’s assets.,” ProPhase Labs CEO and Chairman Ted Karkus said.

The statement added that the bankruptcy process doesn't "involve or impact" ProPhase Labs and its other subsidiaries and is entirely unrelated to the company's exploration of a crypto treasury strategy.

The PRPH stock fell 1% as the market opened on Sep. 23 and was trading at $0.4453 at the time of writing.

This story was originally reported by TheStreet on Sep 23, 2025, where it first appeared in the Bankruptcy News & Analysis section. Add TheStreet as a Preferred Source by clicking here.