U.S. bankruptcy judge John Dorsey rejected a contingency petition from 15 clients of beleaguered cryptocurrency lender Cred Inc. on freezing cryptocurrencies held by the company on stock exchanges as part of bankruptcy proceedings in accordance with chapter 11.
More than a dozen of Cred’s lenders filed an emergency application on November 23, trying to get 21 cryptocurrency exchanges to block assets that Cred had on their own platforms, including five exchanges in the US.
During a hearing on November 25, Dorsey stated that he could not trade on the go without proof of the status and ownership of the cryptocurrencies involved, accusing investors of their apparent lack of effort to track assets:
“At this stage, all I have is the duty of the debtors to fulfill their fiduciary duties to protect the assets of the estate […] All I can do is to place the blame on the debtors.”
However, the judge suggested that issues related to the freezing of Cred’s assets are likely to be discussed at the hearing on December 9, following the proposal of two Cred users on November 18, who are demanding that the case be transferred to liquidation proceedings.
The November 18 dossier accuses Cred of running an “unlicensed hedge fund […]” full of Madoff-level fraud and deception, and it is estimated that Cred’s cash accounts for only 10% of the 136.5 million liabilities. dollars.
Cred filed for bankruptcy on Nov. 7, and Cred described the move as an attempt to “maximize the value of the lenders’ platform.”
On November 8, co-founder and CEO Daniel Chat announced that the former Cred CEO, James Alexander, fled this July, giving his users $ 3 million in bitcoin. The chat also reported that 800 bitcoins, worth over $ 10 million, were stolen from the company by a debtor-led fraudster.
The bankruptcy petition was filed less than two weeks after the announcement of the temporary suspension of the operation.