US-based cryptocurrency lending platform Cred Inc. filed for bankruptcy on Saturday, a week after it announced a freeze on customer funds amid concerns about fraudulent activity on its platform.
Cred—which provides interest on cryptocurrencycryptocurrency deposits and loans backed by crypto collateral, listed estimated assets of between $50 million and $100 million, and liabilities of between $100 million and $500 million.
Previous bankruptcies of big #crypto intermediaries: * MtGox: Japan * Quadriga: Canada So Cred’s bankruptcy will set US precedent. Too bad Delaware hasn’t yet clarified its UCC treatment of #bitcoin. For sake of innocent customers I hope Delaware judge looks to #Wyoming precedent
According to Wall Street and blockchain veteran Caitlin Long, the filing sets a precedent, as Cred becomes the first, big US crypto intermediary to file for bankruptcy. (Other large crypto firms to have filed are Japan’s Mt. Gox, and Canada’s Quadriga.)
“Fraudulent activity”
Cred was founded in 2017 and is based in San Francisco. It provides “insurance, licensing, and liquidity” for customers, according to its website, while taking only a small service charge. It raised $26.4 million in a 2018 ICO of its LBA token, and serves customers in 190 countries, offering interest rates of up to 10% on more than 30 crypto and fiat currencies through its partner network.
In 2019, crypto trading platform Uphold partnered with Cred, and Cred’s CEO Dan Schatt, was appointed as one of Uphold’s board members.
The first sign of trouble came on October 29, when Cred announced that it was halting customers deposits and withdrawals linked to its interest-bearing service CredEarn.
“Cred has experienced irregularities in the handling of specific corporate funds by a perpetrator of fraudulent activity that has negatively impacted Cred’s balance sheet and precipitated a law enforcement investigation into the loss of these funds,” Cred support staff told Decrypt in an email.
Mike Novogratz, billionaire investor and CEO of Galaxy Digital, won half a Bitcoin in an election bet. After getting the call right, he then tweeted that he would give these winnings away in a lottery.
The cryptocurrency world was rife with election bets and projections during a long and protracted period of vote counting in the United States last week. Some crypto traders who thought Trump would get reelected lost up to $11 million as Democratic nominee Joe Biden ended the Trump era. But, tha...
The startup said it was carrying out internal accounting of its assets, and, in consultation with legal counsel, had determined to temporarily freeze customer funds. The statement suggested that Cred suspected the loss might have been an inside job.
In the same month, Uphold told customers that it had “decided to discontinue its relationship with Cred. Today, it announced plans to sue it's former partner, and pledged to return lost funds to Uphold users who had been affected.
“Cred appears to have had the extraordinary bad luck of employing an alleged fraudster, who is accused of stealing money and making bad investments,” Uphold wrote in a blog post.
UPDATE (December 16, 2019): This story has been updated to include latest developments of the QuadrigaCX story including the request for exhumation of the CEO.
It was not your average exchange hack. This is a tale of changing identities, a marriage, a last-minute will and the strange death of a person solely responsible for $190 million in assets. This is the story of QuadrigaCX, Canada’s largest crypto exchange.
On January 14, Gerald Cotten, the 30-year-old co-founder and CEO of Canad...
Long also suggested that Cred’s situation brought to mind that of a fractional reserve, which profits by loaning part of their customers' deposits, while only storing a small fraction of it as available for withdrawal.
“There’s ZERO transparency or counterparty credit risk analysis available for BTC lenders,” she tweeted. “What’s fascinating [about] the collapse of intermediaries in #bitcoin is that they’ve usually been blamed on hacking initially, but then it comes out they were actually running fractional for a long time.”
She warned that more vigilance is necessary as financial institutions can often stay liquid long after they’re insolvent:
“Be careful not to blindly accept the “we were hacked” excuse again—it’s an easy scapegoat that hurts #bitcoin overall & it may or may not prove true,” she said.
A wake-up call for the industry
Cred tweeted that none of its systems, customer accounts, or customer information were compromised by the fraudulent activity, but it’s still unknown how many users were affected and the extent of the funds that have been frozen.
Others have also warned that Cred’s situation should be a wake-up call for the industry, and rival crypto lenders, such as Celsius, have offered to help users recover their funds.
I understand that many of our users have deposited coins with Cred which filed for bankruptcy yesterday. This will make it hard for many to get their coins back. We will try to work with the trustee to see if we can help the community recover what we canhttps://t.co/PA9X9oPmBF
“Cred's loss of funds is a reminder that crypto lenders are responsible for the security and sound reputation that digital banking needs to progress,” said Antoni Trenchev, managing partner at Nexo, another rival crypto-lender, which boasts 800,000 users, and claims to have processed over $3 billion in the past two years.
He added that failure to act would “bring greater scrutiny to our still-nascent industry.”
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
GameStop shareholders should not expect the firm to simply follow in the footsteps of Bitcoin treasury behemoths like Strategy and continue amassing the cryptocurrency, its CEO Ryan Cohen suggested on CNBC’s Squawk Box on Tuesday.
Instead, the firm will follow its own “unique strategy” Cohen said, pointing to the firm’s "very strong" balance sheet with more than $9 billion in cash and marketable securities.
“We made an investment of just over $500 million in Bitcoin, and I look at it as a hedge...
SharpLink Gaming acquired $225 million worth of Ethereum earlier this month, the company said in a press release on Tuesday, adding to its industry-leading holdings.
The Minneapolis, Minnesota-based firm now said it now owns roughly 280,000 Ethereum worth $846 million. The company first purchased the asset just over a month ago.
As of Tuesday, the Ethereum Foundation owned around 217,500 Ethereum worth $655 million across several networks, according to crypto analytics platform Arkham Intellige...
British banking giant Standard Chartered became the first "too big to fail" bank to offer Bitcoin and Ethereum trading through traditional currency platforms on Tuesday, crossing a line that its peers have cautiously approached for years.
The bank will run Bitcoin and Ethereum spot trading services for institutional clients from its U.K. branch, enabling them to execute trades through the same foreign exchange systems they already use.
“Digital assets are a foundational element of the evolution...