Backing the exchange denies owing millions to failed crypto lender Cred

Cryptocurrency exchange Uphold has denied owing approximately $784 million to the liquidation fund of bankrupt cryptocurrency investment platform Cred.

In a court hearing on Jan. 11, Uphold filed a motion to dismiss all counts in the lawsuit filed against the company by Cred in June 2022.

Cred was a cryptocurrency lending service that filed for Chapter 11 bankruptcy in November 2020. In June 2022, Cred’s Settlement Fund filed an opposing complaint against Uphold and two affiliates.

It said Uphold worked with the co-founders of Cred to promote CredEarn and claimed it owed the cryptocurrency lender $783.9 million.

According to the lawsuit, Cred said Uphold partnered with the co-founders of Cred to promote CredEarn, claiming the cryptocurrency investments channeled by Uphold at the time of the market peak were reportedly worth more than $700 million.

The product promised high returns which attracted retail investors, however, Cred’s investments turned sour leading to client losses and a bankruptcy filing in November 2020. Cred’s bankruptcy case has similarities to those of Celsius Network and Voyager Digital.

Additionally, it said Uphold “aid and abetted alleged breaches of fiduciary duty by Cred co-founders Daniel Schatt and Lu Hua and other key Cred officials in connection with the CredEarn program,” according to Law360.

The lawsuit also alleged that Uphold was aware that Cred was “implementing a highly risky hedging strategy and that there was regulatory risk associated with cryptocurrency yield programs.”

However, in its motion to dismiss the case, Uphold called the Cred trust’s allegations against it “inconsistent, conclusive and conspiratorial,” urging the Delaware bankruptcy court to dismiss them.

Uphold’s attorney, Zachary Taylor of Baker & Hostetler, told the court that “unsupported speculation is all the confidence you have,” before adding, “it doesn’t make sense.”

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Uphold denied allegations that it knew about Cred’s risks, arguing that Cred was owned and operated completely independently. He also said he was unaware of CredEarn’s financial problems when promoting the product to Uphold customers.

The motion also argued that it had nothing to do with Cred’s insolvency.

CredEarn “was independently owned, operated and operated by Cred, and it was internal fraud and mismanagement that caused Cred’s downfall,” it reads.

Related: Uphold becomes a UK registered cryptocurrency company upon approval from the FCA

At the hearing, the Cred Trust’s attorney, Joseph B. Evans of McDermott Will & Emery, said the “claims against the insiders regarding their partnership with Uphold had been resolved separately.”

Bankruptcy Judge John T. Dorsey said he wanted to see that settlement agreement, as the court considered the matter.

Uphold is a global multi-asset digital trading platform that claims to have more than 10 million users in 150 countries. It offers trading services for cryptocurrencies, fiat currencies, stocks and precious metals.