A few days after cryptocurrency lending platform, Cred filed for bankruptcy, its former partner, Uphold is set to file a lawsuit in an attempt to recover customers funds.
As CNIR reported Sunday, Cred filed for Chapter 11 bankruptcy on November 7 in the state of Delaware. The startup filing notes that it has assets worth between $50 million and $100 million as against its liabilities ranging between $100 million to $500 million.
Following the filing, Cred hasn’t announced any plans to refund affect users with such a measure primarily possible because of the bankruptcy claims.
But Uphold has been a major Cred partner since September 2019, allowing Uphold users to commit their crypto assets to the CredEarn program to earn interests. Given that Cred’s Earn program involves a three to six months lockup period, it appears funds from Uphold users were also caught up before the latest bankruptcy filing.
It was not until five days ago, or two days to the bankruptcy filing that Upholding officially announced it was dissolving the partnership with Cred. Additionally, Uphold sought to preserve its reputation in the industry by revealing it would take legal action against Cred.
According to an extensive update by Uphold, Cred may not have revealed its insolvent state if not for a nudge by Uphold to disclose the situation publicly. Uphold was acting on information gathered by a journalist investigating Cred’s financial standings and quickly disabled withdrawals and deposits upon realizing the situation.
In the yet-to-be-filed lawsuit, Uphold will allege that Cred perpetrated fraud, breach of contract, and reputational damage. Proceeds from the lawsuit will be dedicated to refunding affected users, although there is no timeline regarding when such repayments will happen.
Cred filed for Ch. 11 bankruptcy protection yesterday. Uphold plans legal action against Cred and its principals for breach of contract, fraud, and related claims. Any proceeds will first be used to help Uphold users who suffer losses at Cred. More herehttps://t.co/rtja2kvzMH
— Uphold (@UpholdInc) November 8, 2020
Cred’s bankruptcy filing allows the startup to try and restructure the business and potentially pay back creditors down the line.
