Bankrupt CRED Allegedly Made Fraudulent BTC Transfer To Crypto Whale

The bankrupt CRED platform allegedly made a fraudulent BTC transfer to a crypto whale worth 516 BTC for a bond that was actually worthless as we can see in today’s latest Bitcoin news.

When the crypto lending platform CRED filed for bankruptcy in 2020 with $500 million liabilities, the company blamed the alleged fraud by an outside investment manager that was entrusted with 800 BTC.

Former employees also said that the company was hurt by souring a $39 million line of credit which was extended to a Chinese lender on the behalf of CEO Dan Schatt. New court documents however filed by the Cred debtors allege that there is also a fraudulent transaction where Cred paid consultant and crypto whale Winslow Carter Strogn more than $4.8 million in BTC in an exchange for a worthless bond. Darren Azman, an attorney said:

“It is a fundamental tenet of bankruptcy law that an insolvent company cannot transfer assets in exchange for no value. That is exactly what happened here. The Trust has already traced and recovered a significant amount of cryptocurrency for the benefit of creditors and will continue to be aggressive in those efforts””

The bankrupt Cred began its life in 2018 as Libra Credit and was established by Dan Schatt and Lu Hua. Libra credit became Cyber Quantum that conducted an initial coin offering back in 2018 and the proceeds provided initial funding for the company that after an organizational move to the US it would become Cred. Cred’s most notable product offering was CredEarn where the customers lent crypto to Cred by promising to be repaid plus interest in the same type of crypto as the original investment. Cred even loaned to MoKredit which is a micro-lending platform and then lent those funds to its own customers who borrowed small amounts with interest rates as high as 35%.

All ongoing communication regarding events leading up to Cred’s filing, next steps and what it means for you will be made available on the customer self-service portal.<https://t.co/QkTGWJ46i4> accessible by everyone.[6/7]

— Dan Schatt (@dschatt) November 9, 2020

Cred’s dealigns with MoKredit were in stablecoin but the debt to the CreditEarn customers was in crypto and left the company exposed to price increases. Accoridng to the documents, Strong had a relationship with Cred in 2020 as a consultant who refers to wealthy investors to them, and then Cred executives referred to Strong as a crypto whale with deep ties to the high net worth crypto community-based in Puerto Rico. Cred also approached strong to invest with CredEarn and executed an agreement to loan about 500 BTC with an interest rate of 9%.
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Now, the trust is investigating all consultant payments and the extent of the involvement in the business practices whcih led to bankruptcy. The trust wants information from Strong to help investigate their parties that referred to Cred.