A climate-focused startup once backed by high-profile investors and responsible for facilitating carbon credits for major corporations like Meta and Microsoft has filed for bankruptcy, just weeks after its co-founder was arrested on fraud charges.

The company, now operating under the name CTN Holdings, is burdened with approximately $170 million in debt. In a court filing, Chief Restructuring Officer Miles Staglik emphasized that the bankruptcy aims to swiftly liquidate assets to repay creditors. However, he noted that the limited pool of potential buyers and the capital-intensive nature of CTN’s ventures may delay any financial recovery for creditors.

The bankruptcy filing follows the indictment of co-founder Joseph Sanberg, who was charged with orchestrating a scheme to defraud investors of at least $145 million, according to a recent U.S. Department of Justice announcement. While Sanberg’s charges pertain to his personal dealings, Staglik clarified that CTN and its affiliates were not implicated in any criminal activity.

In an effort to stabilize operations, CTN and several of its subsidiaries, including Catona Climate Solutions, filed for Chapter 11 bankruptcy protection. The company intends to secure $4 million in funding to manage its insolvency case and plans to auction its assets within 45 days.

Staglik stressed that CTN’s leadership and employees were unaware of Sanberg’s alleged misconduct and are among those affected by his actions. He further stated that Sanberg no longer holds any position within the company and has no involvement in its operations.

Nevertheless, the legal proceedings against Sanberg have negatively impacted CTN’s ability to secure new funding for immediate operational needs. To navigate these challenges, the company has arranged Chapter 11 financing to sustain its operations while seeking buyers for its assets.

Sanberg’s attorney, Marc Mukasey, asserted his client’s innocence, stating, “Mr. Sanberg has pleaded not guilty, and we look forward to vigorously defending him.”

Among CTN’s largest unsecured creditors is the NBA’s Los Angeles Clippers and the Kia Forum, both owned by billionaire Steve Ballmer. The bankruptcy petition lists Ballmer’s entities as holding $40 million in unsecured claims related to contracted carbon credits.

This story was originally reported by Bloomberg’s Benjamin Elgin.