Cryptocurrency lending firm Cred will continue to have control of its business as it treads its path to bankruptcy.
A conduct that is anything but impeccable
In a preliminary hearing on Friday, Delaware Bankruptcy Court Judge John Dorsey rejected a motion to appoint a trustee to oversee Cred's restructuring.
The judge ruled in its ruling that if Cred's shareholders Dan Schatt and Lu Hua attempt to fire Cred's board member Grant Lyon responsible for the restructuring of Cred, then the court will intervene and appoint a trustee to oversee the failure.
Dorsey has also appointed an examiner, who will provide an independent investigation into Cred's business. "There is no evidence that anyone has done anything wrong since it was declared bankrupt," said James Grogan, partner of Paul Hastings LLP, the attorney representing Cred in the case.
“We are not here to sprinkle holy water on what the debtors did before the petition. Nobody thinks this company was well run or a model for business schools. "
Cred froze withdrawals and deposits in October and filed for bankruptcy in November. According to several former Cred employees, the company's filing for bankruptcy under Chapter 11 of the US Civil Code is not representative of the whole story.
A planned failure?
The motion to appoint a Chapter 11 trustee was filed by the United States Department of Justice (DOJ) unit that oversees the administration of bankruptcy cases. Denying the Department of Justice's request, Dorsey expressed his thoughts on Cred's mismanagement.
"There is no doubt, in my opinion, that there was some cheating going on [before the bankruptcy case was filed]," the judge said before deciding not to hire a trustee as Chapter 11 states.
Dorsey has decided to delay a motion to allow a creditor to recover his crypto assets before the others. The motion was filed by UpgradeYa, a company of investment who participated in one of Cred's loan programs.
The company claims to get back the 478,17 BTC (currently worth about $ 11 million) used to secure a $ 2 million loan from Cred (in fiat) before the other creditors even recover their assets.
The company claims that it is entitled to receive the temporarily blocked amount of bitcoins as the property of UpgradeYa and not of Cred. The judge may have to decide whether to apply the famous bitcoin meme "not your keys, not your crypto" in this case.
