Cred Files for Bankruptcy Protection: Are Users’ Funds Safe?

Cryptocurrency lending service Cred officially filed for Chapter 11 bankruptcy protection on Saturday, November 7th. According to CoinTelegraph, the move has left many of the US-based platform’s users to question whether or not the personal funds that are stored in the platform are safe.

The filing comes just over a week after an October 28th announcement that the platform would suspend withdrawals and deposits of funds on the platform for two weeks.

A fraudulent incident

At the time, Cred posted a statement on Twitter to reassure users that the suspension did not take place because the company was under criminal investigation–rather, the company said that the filing was an attempt “to maximize the value of its platform for its creditors.” Cred listed its estimated assets at between $50-100 million and its estimated liabilities between $100-500 million.

1/2 We would like to further clarify that Cred is not under investigation.
Cred approached law enforcement to help investigate irregularities in the handling of specific corporate funds by a perpetrator.

— Cred (@ihaveCred) October 30, 2020

However, the platform did say that it was working with authorities “to help investigate irregularities in the handling of specific corporate funds by a perpetrator” after a “fraudulent incident” committed by “a perpetrator.”

Before withdrawals and deposits were suspended, crypto wallet and trading service Uphold abruptly ended its partnership with Cred without explanation. After the partnership was terminated, reports emerged of users having issues accessing funds in their Cred account; one user claimed to have roughly $140,000 worth of Bitcoin and other assets locked in their Cred account.

So far, however, Cred has denied that any of its users’ funds are compromised in any way; the platform has also said that its systems and customer information remain intact.

 

2/2 No Cred systems or customer information have been compromised.
We are on track to deliver a more comprehensive update in the next 7 – 10 days.

— Cred (@ihaveCred) October 30, 2020

Still, withdrawals and deposits from the platform have been suspended for more than a week, and Cred’s Twitter account has not posted any updates since October 30th.

Additionally, while Cred’s main website has been updated to include information about the bankruptcy, a number of users are still uncertain whether or not they will be able to access their crypto–or when.

Thank you Wendy ❤️😔
Lost thousands of $XRP.
But I feel more sorry for those who put all their XRP in there. For me it is bad, but for others it is their entire stash.

Still hope. As far as I know a Chapter 11 is not the end, but might have to wait for a long time for the zerps

— Research Omega (ARO) (@research_omega) November 8, 2020

For example, Crypto Twitter user AwsomeNada wrote that he “[needs his] money back today,” and claimed to have deposited 7,250 XRP in his Cred account before fund inflows and outflows were suspended.

“I want to know how this can be resolved,” he wrote.

This is not the only recent incident in which customer funds stored on a crypto platform have been inaccessible for more than a week. After the arrest of its founder, OKEx suspended customer withdrawals and deposits of funds on October 16th; they have not yet been resumed.

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