US-based crypto lending service Cred has filed for bankruptcy after the platform lost all its funds to an insider fraud incident. The company suspended all inflows and outflows immediately after filing for Chapter 11 bankruptcy protection in Delaware.
“We deeply regret causing so much concern as we assess the business impact connected with a recent fraudulent incident,” explained the company on Twitter. “Cred is cooperating with law enforcement authorities to investigate the incident. However, no client personal data or account information was compromised.”
Cred called in law enforcement over “irregularities” in the handling of “specific” corporate funds by a “perpetrator of fraudulent activity” only a couple of weeks ago, but stated at the time the law enforcement involvement was “to help investigate irregularities in the handling of specific corporate funds by a perpetrator” and not related to a criminal investigation of any kind.
Japan’s Mt. Gox and Canada’s Quadriga have been to date the biggest crypto companies to file for bankruptcy, but Cred is the first big American firm to go down this route.
According to its website, San Francisco-based Cred provides “insurance, licensing, and liquidity” to customers while only taking a small service charge.
Uphold Cuts All Ties With Cred
Based on the bankruptcy paperwork filed, Cred owes in excess of $67 million but that is not their only problem: cryptocurrency wallet service Uphold cut all ties with Cred, ending their partnership and removing Cred CEO Dan Schatt from their board.
Uphold published a blog stating: “Uphold terminated its relationship and shut off deposits to Cred so quickly in order to protect its customers and because we were, and remain, annoyed that we were not told more about the current situation earlier.”
Although there is currently little information available regarding the alleged fraud at this time, what is clear is that the situation is dire. Uphold went on to say in their statement, “Cred appears to have had the extraordinary bad luck of employing an alleged fraudster, who is accused of stealing money and making bad investments.”
No News Isn’t Always Good News
Cred also tweeted: “No Cred systems, customer accounts, or customer information have been compromised.”
But so far the company has given no indication as to how many users have been affected. There is also no indication so far into the volume of funds that have been frozen.
That tweet dating from October 31 was the last update posted on the firm’s social media and while their main website has had some vague updates, Cred users are still very much in the dark as to whether they will be able to access their crypto again.
Rival crypto lender Celsius has been quick to step up and offer to assist users in attempting to recover their funds.