The troubled American crypto lending service Cred has suggested three ways the company could refund thousands of its customers after it filed for bankruptcy in Delaware this weekend.
In a Telegram post on its official channel, the firm wrote, that they “have come to the conclusion that it is in the best interest of our customers and all stakeholders for Cred to file for Chapter 11 of the United States Bankruptcy Code.”
Per the filling, the company estimates that there are 5,001-10,000 creditors and Cred owns them USD 100m – USD 500m, but has only USD 50m – USD 100m in assets.
“Many Cred employees, including myself have significant amounts of money that have been entrusted with Cred,” Co-Founder and CEO Dan Schatt posted on Telegram.
And he claimed that Cred had “several options” in its quest to pay its debts, namely:
- Selling the company or company assets
- Liquidating its assets
The announcement comes as customers become increasingly nervous about the security of their funds on the platform.
@ihaveCred We just want to know that our funds are safe. Please address this on your next update, not an announceme… https://t.co/v73MDhuk93
In the same Telegram post, Cred hinted that it may be hoping for a hero to emerge – in the form of a crypto-keen buyer. The firm stated that it had appointed the MACCO Restructuring Group “as a financial advisor to evaluate M&A and other restructuring opportunities.”
However, it looks like many Cred customers are already starting to fear a long, drawn-out and nervous wait, with the Cred team writing,
“Chapter 11 has a well-established set of processes, and we expect to come to a resolution within a few months.”
In a press release, the firm added,
“Cred intends to use the Chapter 11 process in its attempt to maximize the value of its platform for its creditors.”
The news comes after a problematic few weeks for Cred. The firm began complaining of a “fraudulent incident” back in October, with the police involved in investigations.
We deeply regret causing so much concern as we assess the business impact connected with a recent fraudulent incide… https://t.co/VkDdMr9enP
It followed up by claiming, on Telegram,
“We also want to acknowledge the concerns expressed about Cred being hacked. We can tell you that’s not the case. No Cred systems, customer accounts, or customer information have been compromised. We know this limited information is not sufficient to understand the status of your funds, we deeply regret any stress this ambiguity has put on you.”
One Twitter user claiming to be from Russia wrote that they had even sold their house and feared they had lost “all of my money with Cred.”
Autumn had begun so promisingly for Cred: In September, the firm announced it had joined the Visa-run Fast Track Program, but worrying signs were ahead when trading platform Uphold dropped its partnership deal with Cred in October – with the latter now threatening legal action against Cred in the wake of the bankruptcy claim.
Meanwhile, as reported, full-service crypto prime broker Genesis said that its lending business added over USD 5.2bn in new originations in Q3, “marking its largest quarter ever by a landslide.”