DOJ charges three former Cred executives for causing over $783 million in losses to customers’ funds
On May 3, the US Department of Justice (DOJ) revealed the charges against three former executives of Cred, a now-bankrupt cryptocurrency lending and investing firm. The accused individuals are Daniel Schatt, the co-owner and former CEO of Cred, Joseph Podulka, the former CFO, and James Alexander, the former CCO. According to authorities, the trio was involved in a scheme that resulted in customers losing cryptocurrency holdings now valued at over $783 million. Mark Mosley, Acting Special Agent in Charge for IRS Criminal Investigation, referred to their alleged actions as a “predatory, deceptive scheme.”
The allegations claim that Cred offered loans in US dollars to customers who used their crypto assets as collateral. Additionally, customers who deposited their cryptocurrency were promised interest or yield. However, it is claimed that starting from March 2020, the three executives made false statements. These statements included the assertion that Cred only engaged in collateralized and guaranteed lending, utilized hedged crypto investments, and remained protected against volatility. Marketing materials allegedly misrepresented Cred as a licensed lender with comprehensive insurance. Despite potential insolvency and knowledge of the firm’s financial situation, the executives continued to seek new customer funds without disclosing these details. It is also alleged that the executives withheld information regarding the fact that customer yields were primarily generated by a single company making micro-loans to Chinese gamers.
A federal grand jury has charged each of the three individuals with multiple counts of conspiracy, wire fraud, and money laundering. The charges carry hefty maximum sentences, including decades in prison and substantial fines. Schatt and Podulka have already made their initial court appearance, with a return date set for May 8. Alexander’s initial court appearance is pending.
The case is being heard in the Northern District of California, which also saw Alexander Vinnik, the operator of BTC-e, plead guilty to charges on the same day. Notably, the DOJ has recently announced two other significant cases; one involves Bitcoin proponent Roger Ver, who is being charged with tax evasion in the Central District of California, and the other targets the founders of the privacy-enabled crypto wallet Samourai Wallet in the Southern District of New York.