Uphold exchange denies owing millions to failed cryptolender Credo

Crypto exchange Uphold has denied that it owes about $784 million to the liquidation fund of the failed crypto investment platform Cred.

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

Cred was a crypto-lending service that filed for Chapter 11 bankruptcy in November 2020. In June 2022, Credo’s liquidation trust filed an adversary lawsuit against Uphold and two related companies.

Uphold was alleged to have worked with Cred co-founders to promote CredEarn and claimed to owe the crypto lender $783.9 million.

According to the lawsuit, Cred alleged that Uphold worked with Cred’s co-founders to promote CredEarn, claiming that crypto investments directed from Uphold at the time of the market peak would be worth more than $700 million.

The product promised high returns that attracted small investors, however, Credo’s investments failed leading to customer losses and a bankruptcy filing in November 2020. Credo’s bankruptcy case has similarities to those of Celsius Network and Voyager Digital.

It further alleges that Uphold “aided and abetted the alleged breaches of fiduciary duties by Cred co-founders Daniel Schatt and Lu Hu and other key Cred officials in connection with the CredEarn program,” according to Law360.

The lawsuit also alleges that Uphold was aware that Cred was “implementing a high-risk hedging strategy and that there is regulatory risk associated with cryptocurrency yield programs.”

However, in his motion to dismiss the case, Uphold called the Cred trust’s allegations against him “incoherent, irrefutable and conspiratorial,” urging the Delaware bankruptcy court to dismiss them.

Uphold’s lawyer, Zachary Taylor of Baker & Hostetler, told the court that “unsubstantiated speculation is all the trust has,” before adding “it makes no sense.”

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Uphold denied allegations that it was aware of the risks at Cred, arguing that Cred was owned and operated completely independently. He also claimed he was unaware of CredEarn’s financial problems when he promoted the product to Uphold customers.

The motion also claimed it had nothing to do with Credo’s insolvency.

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

Related: Uphold becomes a UK registered crypto asset company following FCA approval

At the hearing, Cred’s attorney, Joseph B. Evans of McDermott Will & Emery, said that “the claims against the insiders related to their dealings with Uphold have been resolved separately.”

Bankruptcy Judge John T. Dorsey said he wanted to see that settlement agreement as the court took the matter into consideration.

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 in crypto assets, fiat currencies, stocks and precious metals.