$150M Crypto Collapse: Former Cred Executives Plead Guilty to Wire Fraud

$150M Crypto Collapse: Former Cred Executives Plead Guilty to Wire Fraud

Ex-CEO and CFO Admit to Misleading Customers as Cred Crashed

Daniel Schatt, the former CEO of now-defunct crypto lender Cred, and Joseph Podulka, the company’s ex-chief financial officer, have pleaded guilty to wire fraud charges in connection with Cred’s $150 million collapse. The guilty pleas were entered on May 13 in a California District Court before Judge William Alsup, who scheduled sentencing for August 26.

The charges stem from what federal prosecutors described as a deliberate scheme to mislead customers about Cred’s financial health. Schatt and Podulka admitted to concealing risks, selectively presenting only favorable data, and soliciting funds under false pretenses to support the struggling crypto lender.

Cred’s Fall: $150M in Customer Losses, $783M in Market Value

When Cred filed for bankruptcy in November 2020, customer losses were reported to be between $65 million and $150 million. However, the U.S. Department of Justice noted in May 2024 that the current market value of recovered assets exceeds $783 million—a striking recovery that contrasts the firm’s deceptive handling of investor money at the time.

Both executives faced 13 counts of wire fraud and money laundering, but opted for plea deals, possibly in exchange for reduced sentences. Prosecutors are recommending up to 72 months (6 years) in prison for Schatt and up to 62 months (just over 5 years) for Podulka. The statutory maximum for wire fraud is 20 years in prison and $250,000 in fines per individual, or $500,000 for corporate entities.

Deception Hidden Behind Positive Messaging

According to filings, Schatt and Podulka intentionally misrepresented Cred’s loan and investment practices. Key among the misrepresentations was the undisclosed dependency on MoKredit, a Chinese microloan firm providing unsecured loans to gamers. This heavy reliance contradicted Cred’s public claims that it only engaged in collateralized and hedged lending.

Prosecutors allege that following a 40% plunge in Bitcoin prices on March 11, 2020, Cred was unable to meet its margin calls, edging toward insolvency. Yet rather than disclose the crisis, the executives continued to seek new investors and downplayed the risks—a move that eventually unraveled as the firm collapsed.

More Executives Facing Charges

James Alexander, Cred’s former Chief Commercial Officer, has also been charged with wire fraud and money laundering in the same case. He allegedly participated in the same efforts to mislead customers and hide the firm’s financial instability.

Cred’s downfall adds to the growing list of high-profile crypto fraud cases. Just days earlier, Alex Mashinsky, founder of Celsius Network, received a 12-year prison sentence for a similar fraud scheme. In January, Travis Ford, co-founder of Wolf Capital, pleaded guilty to wire fraud conspiracy after raising over $9 million with false investment promises.