A bankruptcy judge in the United States has dismissed a motion to freeze the assets of a digital currency lending platform, leaving its users battling to reclaim their funds.
Judge John Dorsey denied the emergency motion filed by 15 customers of crypto lender Cred Inc., which attempted to freeze funds held by the firm on exchanges, amid ongoing bankruptcy proceedings.
Judge Dorsey said he was unable to allow the motion without more evidence of the ownership and status of the crypto assets in question, suggesting the investors should have put more effort into tracking down their assets.
“At this point, all I have is the obligation of the debtors to exercise their fiduciary duty to protect the assets of the estate […] all I can do is admonish the debtors.”
The issues involved are likely to be discussed at a hearing on December 9, as part of a separate stream of action in which two investors are attempting to turn the case into liquidation proceedings against the troubled digital currency lender.
In the original filing on November 18, Cred was accused of operating as an “unlicensed hedge fund […] rife with fraud and deception on ‘Madoff’ level proportions.” According to the filing, Cred was said to hold assets equal to just 10% of its overall liabilities, standing at $136.5 million.
In a bid to “to maximize the value of its platform for its creditors,” Cred filed for bankruptcy. In a declaration the following day, the CEO Daniel Schatt said James Alexander, former chief capital officer, had stolen $3 million in BTC from users, while a fraudster inadvertently hired by its debtors had made off with a further $10 million, equivalent to 800 BTC.
After announcing a temporary suspension of service, the firm filed for bankruptcy within two weeks. Following the latest ruling, investors on the platform will now await their fate with other creditors in the bankruptcy process.
See also: CoinGeek Live panel on the Future of Digital Asset Security & Custody
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.