- Cred paid a whale BTC 516 for a worthless bond
- He may have been aware that Cred was facing bankruptcy
Crypto lending platform Cred pointed to alleged fraud by an outside investment manager entrusted with 800 BTC when it filed for bankruptcy in November 2020. At that time, its debts were around $500 million. Former staff said Cred had been hurt by a failed $39 million line of credit the lender had given a Chinese company.
The truth
New court documents filed by Cred Trust, an entity representing Cred’s debtors, reveal evidence of a fraudulent transaction. Apparently, Cred paid a whale and consultant called Winslow Carter Strong a large amount of bitcoin (516, worth about $21 million today) for a bond that was basically worthless, CoinDesk reported.
Darren Azman, an attorney representing the Cred Liquidation Trust, told CoinDesk in an email:
“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 road to insolvency
According to the new evidence, Strong and Cred developed a relationship in early 2020. The former promised Cred he would refer wealthy crypto investors to them, claiming to be a “crypto whale” with strong connections to the Puerto Rican high-net-worth crypto community.
Cred also approached the whale to invest with them at CredEarn. They agreed Strong would loan them 500 bitcoin at an interest rate of 9%.
A new and 'better' opportunity
Cred also approached Strong with another proposal right before the CredEarn agreement was concluded. They asked him to buy a bond from Income Opportunities, which they called a “bankruptcy remote entity.”
Allegedly, Strong was aware that Cred was facing bankruptcy, in part due to a classified document Cred execs had provided to another partner. He figured the bonds were a safer approach than lending CredEarn money.
Eventually, Strong bought a note from Income Opportunities by making a transfer of the bitcoin he was lending to CredEarn. Several months after that, Cred repurchased the note from Strong for around 516 bitcoin. At that time, Cred was already on the road to insolvency.
They filed for bankruptcy in another few months. They had compensated the consultant and whale, but most of their other investors were left in the lurch.
The future of Cred
At the moment, the Cred Trust is probing Cred’s consultant payments to Strong and to what extent the latter was involved with the business practices culminating in insolvency.
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