Crypto Lending Platform Cred Files For Bankruptcy

News | November 10, 2020 By:

Crypto lending platform Cred has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.

Founded by former PayPal financial technology veterans, Cred is a decentralized global lending and borrowing platform that allows stablecoin issuers, exchanges and wallets to provide valuable earn and lending services worldwide. Cred claims to have secured over $300 million of lending capital.

The bankruptcy filing came after its founder Daniel Schatt and former Chief Capital Officer James Alexander got into a bitter legal fight and the company’s bitcoin hedging strategy foundered amid pandemic price fluctuations. Schatt said in court papers that the company was defrauded by Alexander, who tried to take control of a unit of the company and later ran off with around $3 million in bitcoin that was meant to help the company rectify its hedging strategy.

In its filing, Cred listed estimated assets of between $50 million and $100 million and liabilities between $100 million and $500 million. Cred said it intends to use the Chapter 11 process in its attempt to maximize the value of its platform for its creditors.

In connection with the Chapter 11 filing, Cred has also appointed a new Independent Director to its Board, Grant Lyon, who will also serve as Chair of the Restructuring Committee for the Company during the Chapter 11 process. Grant brings over 30 years of experience in corporate restructuring, expert testimony and corporate governance. Grant was selected due to his ability to conduct fair and objective analysis of company operations, development of strategic plans, cash flow analysis, liquidity alternatives, negotiations, and restructuring alternatives that serve the best interests of the Company and its stakeholders. Cred has also engaged Paul Hastings LLP as its legal advisor during the Chapter 11 case, and MACCO Restructuring Group as financial advisor to evaluate M&A and other restructuring opportunities.

Reacting to Cred’s bankruptcy, Nexo Managing Partner Antoni Trenchev said that 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.

“This situation is regrettable for those affected, but it is also yet another wake-up call for players in the industry who are not taking the necessary precautions to guarantee the safety of their clients’ funds and thereby bring greater scrutiny to our still-nascent industry,” said Trenchev. “I am proud of the example Nexo sets in this respect, only lending funds on an overcollateralized basis and being accountable for our footprint in the blockchain space.”