The firm, started by MP3.com founder Michael Robertson in 2005, was unable to finance a long-running legal battle with record label EMI Music.
"Four and a half years of legal costs and we're not even out of trial," Robertson told CNET. "MP3tunes has no choice but to file [for bankruptcy]... This is what they do. The labels engage in multi-year legal battles and put small companies through hell for years."
Kevin Carmony, a former employee of Robertson's, posted MP3tunes.com financial documents online, revealing liabilities of between $1 million and $10 million (£616,000 and £6.2m). The site's founder refused to comment on the possibility of staff layoffs.
Robertson, the man behind one of the first MP3 sites on the internet, accused EMI of launching a crusade against his company.
"EMI went to other companies and demanded that they not work with us," he added. "They went to retailers, as one example, and forbid those guys to work with us."
EMI Music is yet to comment on the latest turn of events.