Cred, the digital currency service provider that gave interest on digital currency deposits and let individuals take out digital currency-collateralized loans, has filed for chapter 11 bankruptcy. Cred filed for bankruptcy on November 7th and allegedly has between $50-$100 million in assets but $100-$500 million in liabilities.
How did Cred go bankrupt?
In hindsight, there is evidence that Cred was having financial trouble that could lead to bankruptcy. On October 28, Cred announced that its balance sheet had been “negatively impacted” by a “perpetrator of fraudulent activity.” The following day, Cred suspended customer’s deposits and withdrawals to its interest-bearing service CredEarn.
Subsequently, digital currency trading platform Uphold announced that it had “decided to discontinue its relationship with Cred;” and in a blog post, Uphold went on to say that,
Cred appears to have had the extraordinary bad luck of employing an alleged fraudster, who is accused of stealing money and making bad investments. We do not know the extent of any damage this may have caused. This is obviously very upsetting for Cred’s customers as well as the many good and talented people who work at the firm. As far as we know, the matter relates to one former employee.
This indicates that Uphold believes that the fraudulent activity that took place at Cred was an inside job.
On November 8th, Uphold announced that it “plans to sue Cred LLC, the corporate entity, its affiliates, as well as Cred’s founders for fraud, breach of contract, and reputational damage. Any proceeds Uphold receives from these actions will first be distributed among Uphold customers who have lost money at Cred. Uphold will fund the costs of this litigation.”
What’s next for Cred?
Cred has hired MACCO Restructuring Group as a financial advisor to assist the company in assessing merger and acquisition opportunities as well as restructuring opportunities.
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