Cred, Inc. Files for Bankruptcy
Updated: Dec 1, 2020
Cred Inc., a cryptocurrency investment platform, filed for Chapter 11 bankruptcy protection on Saturday, November 7, 2020 in Delaware after a brief two-year existence. The company attracted over $114 million in cyrpto-denominated investments from over 6,000 investors. However, through a combination of mismanagement, self-dealing and fraud, Cred lost or dissipated most of these funds.
One of Cred’s founders and CEO Dan Schatt has dragged the company into a costly and distracting legal battle, as the company’s Bitcoin hedging strategy fell flat amid pandemic fluctuations in prices for cryptocurrency. The other founder, Lu Hua, caused Cred to loan nearly $40 million to his China based startup moKredit, which has since defaulted.
In an affidavit, Mr. Schatt claims that Cred was defrauded by its former chief capital officer James Alexander, who he claims tried to take control of a unit of the company and stole $3 million in Bitcoin that was meant to help the company rectify its hedging strategy.
“A material loss connected with the onboarding of a fraudulent asset manager by former Chief Capital Officer, James Alexander, and his misappropriation of certain Debtors’ digital assets severely impaired the Debtors balance sheet,” according to the court filing.
In its Chapter 11 bankruptcy filing, Cred Inc. claims assets of roughly $68 million and against liabilities of roughly $136 million.
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