Uphold to sue Cred after lending service firm filed for bankruptcy
|- Cred files for bankruptcy after failed attempts to recover from creative accounting.
- Uphold plans to sue the company for the breach of contractual obligations.
The trading platform Uphold plans to sue the lending platform Cred for a failure to inform the first one about the financial issues that eventually led the second one to bankruptcy.
Cred goes down, cries fraud
In October, the company revealed discrepancies in its corporate funds management and announced that it fell victim to fraudulent activities. Following the legal advice, Cred stopped deposits and withdrawals under CredEarn program.
According to Cred's estimates, its assets are worth $50-100 million, while its liabilities may exceed $500 million. The community believes that the company may have been financially vulnerable even before the accounting incident, as many service providers failed to recover after a sharp cryptocurrency market collapse in March.
Uphold puts the last nail in Cred's coffin
Within hours after the disclosure, Uphold informed the customers of the decision to terminate the relationship with Cred and blocked deposits into the firm. The company insisted that Cred should have properly informed their regulators and publicly disclose the matter.
Uphold announced that Cred breached its contractual and fiduciary obligations as it revealed the problem only after it was approached by a journalist who was investigating potential issues at Cred. Now the trading platform plans to sue the lending one for that, as explained on Uphold's website:
As a result, Uphold today announces that it plans to sue Cred LLC, the corporate entity, its affiliates, as well as Cred's founders for fraud, breach of contract, and reputational damage.
The company also promises to distribute all the proceeds from the legal actions to all the customers affected by Cred's incident. Meanwhile, the cost of litigation will be funded by Uphold's money.
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