Cred Bankruptcy Case: A Wake-Up Call for the Encryption Lending Platform and the Rise of Decentralized Finance

In the Crypto Assets industry, lending activities have always been a controversial area. Recently, the news of the well-known crypto lending platform Cred filing for bankruptcy has attracted widespread attention. As a lending institution managing over $300 million in credit balance, Cred's collapse is not only shocking but also exposes the potential risks and issues within the industry.

The background of the founders of Cred is quite impressive. Both co-founders have worked at PayPal and possess extensive experience in financial technology. When the company was established in 2017, it received investment support from several well-known institutions, raising over $25 million. However, beneath the seemingly glamorous exterior lie numerous problems.

The conflict of interests among executives is one of the surface reasons for Cred's bankruptcy. The company encountered fraud issues when handling certain funds and cooperated with law enforcement for an investigation. Former Chief Investment Officer James Alexander and CEO Daniel Schatt had a dispute over the control of the company, with both sides accusing each other of misconduct. However, these disputes are just the tip of the iceberg.

What is even more concerning is the potential issue of fund misappropriation within the company. According to former employees, Cred lent over $39 million to another company called moKredit. This company has close ties to Cred co-founder Lu Hua. However, there is no clear follow-up arrangement regarding the repayment plan and interest rate for this massive loan. There are signs that Cred may be misusing the assets pledged by customers.

The collapse of Cred has caused significant losses for many investors. Some have even lost their life savings. Currently, Cred is seeking the possibility of bankruptcy restructuring, but considering its complex financial situation and debts of up to $500 million, the future outlook is not optimistic.

The Cred incident revealed the potential risks present in the encryption lending industry. Although many CeFi platforms manage billions of dollars in assets, their fund management and operational details are often opaque. Investors find it difficult to understand how their funds are being used and whether there is misappropriation or high-risk operations.

In contrast, DeFi (Decentralized Finance) platforms are receiving increasing attention due to their transparency and autonomy. Although DeFi also carries risks, its open and auditable characteristics provide users with more security guarantees.

The collapse of Cred warns us that we need to be extra cautious when investing in the crypto assets field. Whether choosing a CeFi or DeFi platform, investors should thoroughly understand their operational mechanisms, assess potential risks, and always remain vigilant. Only in this way can we protect our asset security in this industry filled with opportunities but also challenges.