Recent developments reveal that cryptocurrency platform Cred employed a convicted financial criminal and U.K. fugitive as its chief capital officer (CCO). This was disclosed by a court examiner’s report as Cred is currently being investigated by the bankruptcy court in Delaware.
Bankruptcy And Bad Decisions
The CCO of Cred James Alexander, was in charge of raising and deploying the firm’s capital before its demise. The examiner’s report states that U.K. authorities had identified Alexander as a financial fugitive sentenced to more than three years of imprisonment in December 2007. At the time of his incarceration, there was a prison break in which Alexander escaped from prison and, as such, was termed a U.K fugitive.
According to the report, Alexander’s poor decision-making skills were a major factor in the bankruptcy of Cred. As an essential cog in the company, he was not diligent and honest in his participation and involvement in the company’s finances.
He was said to have overseen matters requiring how capital was raised or deployed freely without asking for the company’s board approval.
Cred’s Downward Spiral
It all started to go downhill for the crypto firm when the price of Bitcoin (BTC, +4.57%) crashed to around $3,500, which was worrisome as the company’s hedged positions were not protected.
The CEO Dan Schatt then became concerned about how his CCO had arranged its finances, not knowing Alexander had transferred over $2.3 million in U.S. dollars and bitcoin to his personal account.
Cred’s customers alleged that the firm had lost $66 million in less than two years through fraud and incompetence.
This was no surprise as the examiner’s report explained that Cred had done zero accounting and compliance practices. The lack of standardized reporting and tracking processes, in addition to the blatant comingling of customer and company funds, made it a company to be worried about.
“By the time Cred filed for bankruptcy, it had not performed a comprehensive financial reconciliation of accounts in almost a year,” the report read.
Founded in 2018 by former PayPal employees Daniel Schatt and Lu Hua, Cred confirmed the news of its bankruptcy officially in November even though users were already alarmed about the company’s fate in October. This was when the platform first announced that it would be suspending deposits and withdrawals for two weeks.
Another red flag in October was when crypto wallet provider Uphold terminated its partnership with Cred. Uphold only provided few details regarding the termination, simply stating that Uphold users will no longer be able to link their Uphold wallet to Cred.