Cryptocurrency exchange Uphold has denied any responsibility for the $784 million debt owed to the liquidation trust of the now-defunct cryptocurrency lending platform, Cred.
On January 11, Uphold filed a motion to dismiss all charges in the June lawsuit brought against the company by Cred.
Cred filed for Chapter 11 bankruptcy in November 2020. In June 2022, Uphold and two affiliates were the targets of an adversary complaint filed by Cred’s liquidation trust.
Cred claimed in the lawsuit that Uphold collaborated with Cred’s co-founders to promote CredEarn, and the crypto investments managed through Uphold at the time of the market top would have been worth more than $700 million. As a result of the collaboration, Uphold owes the cryptocurrency lender $783.9 million.
The program attracted retail investors by promising high payouts. Cred’s investments, on the other hand, failed, resulting in client losses and a bankruptcy filing in November 2020.
According to Law360, Cred also claimed that Uphold aided and abetted alleged breaches of fiduciary duties by Cred co-founders Daniel Schatt and Lu Hua, as well as other key Cred officers, in connection with the CredEarn program.
The lawsuit further claimed that Uphold knew that Cred was employing a highly risky hedging approach and that the cryptocurrency yield-earning programs came with regulatory risk.
Meanwhile, in its request to dismiss the complaint, Uphold urged the Delaware bankruptcy court to disregard Cred Trust’s accusations against it, calling them incoherent, conclusory, and conspiratorial.
According to Uphold, Cred was owned and run fully independently, which refuted claims that it was aware of the risks involved. Moreover, it claimed that when it advertised the program to Uphold users, it was unaware of CredEarn’s financial difficulties.
The Uphold also claimed it had nothing to do with Cred’s insolvency, stating:
“CredEarn was owned, managed, and operated independently by Cred, and it was internal fraud and mismanagement that caused Cred’s downfall.”
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