File sharing service BitTorrent has undone its $17 million financing from earlier this year, we've learned from an investor in the company, and that money (or what's left of it) has been returned to investors DCM, Accel Partners and DAG Ventures.
The company, admitting that the their business was "not gaining sufficient traction," has closed a new $7 million round of financing from those same investors at a "substantially reduced" valuation of $28 million.
Down valuation rounds are common in tough economic times. But rescinding entire rounds of financing and returning capital to investors isn't - it's a sign of significant distress at a startup.
From a letter to shareholders: