CRED CRYPTOCURRENCY PLATFORM FILES FOR BANKRUPTCY

The licensed platform Cred, which works with digital assets and cryptocurrency, has launched the bankruptcy proceedings in the United States. Such a move was quite expected for the decentralized finance (DeFi) industry, after the firm announced a two-week suspension of cash withdrawals in late October.

Back in early summer, experts noted that many speculators and investors are gradually losing interest in the DeFi market. The fears of many tech companies are also fueling the risk of depreciation, as it was 20 years ago during the dot-com crisis.

Cred is one of the few licensed US electronic platforms that issued loans using digital assets as collateral.

Despite the fact that Cred LLC has repeatedly declared guarantees of the safety of funds, refusing to use blockchain and smart contracts in its operations, the money was still lost.

The representatives of the firm stated that the platform had become a victim of fraud, and law enforcement agencies have already joined in the capture of possible criminals. At the same time, the suspension of the possibility of withdrawing funds by clients for two weeks, as it was reported on October 28, is not connected with a criminal investigation. 

According to a number of experts, the company's current liabilities to its customers reach half a billion dollars, while in fact the firm has an amount of no more than $ 100 million.

Even the fact that the information about the bankruptcy petition filed in the court was not made published on the website says a lot.

As a result, the information published in a number of media had a negative effect on cryptocurrency exchanges, putting the LBA token to the all-year lowest position for the entire 2020. Analysts suggest that if the court ultimately upholds the company's statement, the value of the digital coin could go to zero.

Previously, the company managed to establish cooperation with VISA, using the presence of a license and partnership with the well-known custodian services. Using the Fast Track program, the company has integrated the process of issuing cryptocurrency loans for "hot" (requiring constant connection to the network) wallets. 

However, judging by individual hints from the founders of Cred, it was cooperation with VISA that could eventually become the “Achilles’ heel” of the service for fraudsters and subsequent financial ruin.

At the same time, some insiders report that the platform might not have been hacked, and the company's problems are associated with the costs of excessive centralization, which did not allow to have a lightning-fast response to the market fall on March 12, 2020. The plans to cover losses with profits failed, and a large hole formed in the Cred's balance sheet.