On November 7, 2020, Cred Inc. and four affiliates, operators of a global cryptocurrency transfer platform that serves retail and institutional clients, filed for chapter 11 protection in the Bankruptcy Court for the District of Delaware before the Honorable John T. Dorsey.1 The filings were allegedly precipitated by the fraudulent activity of a former executive as well as a theft of customer assets by an “imposter” entity purporting to be Quantcoin. The debtors enter bankruptcy with customer claims ranging from $432,000 to $14.1 million, as well as $2.6 million in unsecured convertible notes and approximately $1 million in trade claims.
These filings are noteworthy as the first major bankruptcy cases related to cryptocurrency and trading platforms. As such, the proceedings will likely present creditors with novel bankruptcy issues, including the legal status of cryptocurrency, application of various exemptions, and the valuation of claims. Many of these issues will be matters of first impression in Delaware. Seward & Kissel LLP will continue to monitor these cases closely. If you have any questions or concerns, please don’t hesitate to reach out to Robert J. Gayda (212-574-1490), Anthony Tu-Sekine (202-661-7150), or your primary contact at S&K.