Bankrupt Cred Accused of Fraudulent Bitcoin Transfer to Crypto Whale

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Key Takeaways:

  • According to new court documents filed by the trust representing Cred’s debtors, there was a fraudulent transaction in which Cred paid consultant and “crypto whale” Winslow Carter Strong over 516 bitcoin in exchange for an essentially worthless bond.
  • The Cred trust is currently looking into Cred’s consultant payments to Strong as well as his involvement in the business practices that led to the bankruptcy.

The crypto lending platform Cred was filed for bankruptcy in November 2020 with up to $500 million in liabilities. Cred primarily blamed alleged fraud by an outside investment manager entrusted with 800 BTC. Former employees also claimed that the company was harmed due to the failure of a $39 million line of credit that Cred extended to a Chinese lender at the request of CEO Dan Schatt.

However, according to new court documents filed by the trust representing Cred’s debtors, there was also a fraudulent transaction in which Cred paid consultant and “crypto whale” Winslow Carter Strong over 516 bitcoin (worth approximately $4.8 million at the time of sale and $21 million today) in exchange for an essentially worthless bond.

Darren Azman, an attorney at McDermott Will & Emery LLP representing the Cred Liquidation Trust, told CoinDesk in an email that “It is a fundamental tenet of bankruptcy law that an insolvent company cannot transfer assets in exchange for no value. Unfortunately, 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 Cred trust is currently looking into Cred’s consultant payments to Strong and his business practices that led to the bankruptcy. The trust also wishes to obtain information from Strong to investigate third parties to whom Strong referred Cred.

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Chaahat Girdhar

I'm Chaahat Girdhar, a journalist by profession who's turning her dreams into vision and vision into reality. I'm curious and have an appetite for gaining new knowledge. So I'm looking forward to learning things in the better way possible.

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