United States-based cryptocurrency lending platform Cred Inc. filed for Chapter 11 bankruptcy protection in Delaware on Saturday in an attempt “to maximize the value of its platform for its creditors.”
In its filing, Cred listed estimated assets of between $50 million and $100 million and liabilities between $100 million and $500 million.
According to the press release, Cred has appointed well experienced Grant Lyon to its board as an independent director to oversee the restructuring process. The company has also hired Paul Hastings LLP as its legal advisor as well as MACCO Restructuring Group as financial advisor to evaluate M&A and other restructuring opportunities.
The filing for bankruptcy follows an earlier announcement on October 29 that the platform will be temporarily suspending the inflow and outflow of funds for two weeks due to an ongoing investigation connected with fraud.
Cred tweeted that they are cooperating with law enforcement authorities to investigate the incident, stating that no client information was compromised.
Uphold to sue Cred for breach of contract
Shortly before the announcement, major U.S trading platform Uphold issued an official notice terminating their partnership with Cred on October 25, stating that Uphold customers can no longer link their wallets with Cred.
Uphold claims to have only found out about the incident on Friday, October 23, after which they cut ties with the company and removed Cred’s CEO, Dan Schatt as a designee Board Member at Uphold.
In the early hours of today, Uphold announced its plans to sue Cred LLC, its affiliates, and founders for fraud, breach of contract, and reputational damage.
According to the report, Uphold customers who lost money will be compensated from the proceeds of the litigation which will be funded by Uphold. It is currently impossible to estimate how much money will be recouped as compensation will depend on the bankruptcy proceedings.
Cred’s customers ask questions
Following the incident, Cred’s customers have been demanding answers regarding the recovery of their funds.
Lately, there have been similar incidents jeopardizing customer trust with third-party custodians over their funds. One good example is the cryptocurrency exchange OKEx whose withdrawals have remained closed since October 16 on the basis of police investigations.
