Are there any stories of Silicon Valley start-ups getting themselves into a similar state to this with a product at a similar stage?

didn't look like they were very scrappy from those pictures

I'm getting the feeling they had too much cash too early and didn't have a good balance of hacker founders. They had two (excellent) UK web agencies working for them that wouldn't have come cheap.

Plus they were working in Clerkenwell, London (around the corner from my work offices) and rent around here isn't cheap. Did they really need 12 employees to launch?

I think the story is a little strange with the divorce forcing a freeze on the invested money. It sound more like the investor didn't want to pay, as there are 10 other similar products/sites and their application cost much but didn't deliver much.

Sure wish I have enough money to spring for all those Cinema Displays and fancy web agencies to contract work out to.