Los Angeles - BitTorrent, the file-sharing software company founded by the creators of the peer-to-peer protocol, has returned the $17 million financing round it announced in June to investors, opting instead to take $7 million at a substantially reduced valuation of $28 million, TechCrunch reported.

The company's investors include Accel Partners, DCM and DAG Ventures.

BitTorrent, which recently shuttered its Web entertainment download store, cited the overall economy, inability to raise funds from other sources, and the fact that its business is "not gaining sufficient traction" for the drastic move.

The company recently saw the departure of co-founder and president Ashwin Navin, and CEO Douglas Walker.

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