Based in the United States, Cred is a crypto lending service that has recently filed for Chapter 11 bankruptcy. This has prompted many customers of the platform to look for ways to get back their funds. According to the court documents that were filed, the chief executive of Cred, Danial Schatt, asked his legal team to file the bankruptcy papers for the company on November 7th, 2020 and they were submitted to the District of Delaware. This bankruptcy filing took place after the platform made an announcement on October 28th, 2020. The announcement said that the company was suspending the inflows and outflows of funds for two weeks.
Cred adamantly posted on its Twitter account that the filing was regarding a kind of criminal investigation. Instead, they said that they were simply working with the authorities for assisting them in addressing some irregularities where specific corporate funds had been handled by a perpetrator. Thus, Cred claimed that this didn’t fall into the realms of a criminal activity and was only a ‘fraudulent incident’, which doesn’t have any criminal associations in the slightest. However, another factor that has raised some suspicion is how the crypto lending service lost its partnership with a crypto trading platform and wallet called Uphold.
This occurred just before the announcement was made. Prior to the termination of the partnership, it was reported that Uphold clients were having trouble with the CredEarn program and had alleged that the problem had occurred due to Cred. After the partnership with Uphold was revoked, a user said that Bitcoin and other crypto-assets that were valued at almost $140,000 had been locked in his account with Cred. However, Cred continues to repeat that this was not a criminal incident and was in fact, a fraudulent incident. The company assured the public that none of its systems, customer information or customer accounts had been compromised in this ‘incident’.
Even so, there has been no update by Cred on Twitter and neither have they sent any email to their clients, since October 30th, about the assets on its platform. One Twitter user said that their only concern was to find out if their funds were safe and they begged Cred to provide information about them in their next announcement. However, the platform has indeed updated its website because it shows the information about them filing for Chapter 11 bankruptcy. Even then, a lot of users did not get the message and they actually ended up transferring a significant amount of funds, just prior to when access was blocked.
This chaos caused by Cred is just another example of why the old saying ‘Not your keys, not your crypto’ has become popular. After all, any centralized exchange where you keep your crypto will have control over them. However, users of the crypto lending service are hoping that regulators will be able to keep their funds safe through oversight, if it happens. With any luck, this problem could end up being in favor of the investors.