The US Department of Justice (DOJ) has recently brought charges against three former executives of the defunct crypto lending and investing firm Cred. These individuals, including Cred co-owner and former CEO Daniel Schatt, former CFO Joseph Podulka, and former CCO James Alexander, are accused of orchestrating a scheme that resulted in customers losing crypto holdings worth over $783 million.
The DOJ alleges that the executives engaged in deceptive practices, making false statements since at least March 2020. These statements included claims that Cred only participated in collateralized and guaranteed lending, utilized hedged crypto investments, and had protection against market volatility. Additionally, marketing materials falsely portrayed Cred as a licensed lender with comprehensive insurance coverage.
Despite facing financial challenges, the executives allegedly misled customers by asserting Cred’s solvency and promising insurance coverage to reimburse losses. It was revealed that most customer yields were derived from a single company providing micro-loans to Chinese gamers, a fact not disclosed to customers.
Each of the accused individuals has been charged with conspiracy, wire fraud, and money laundering by a federal grand jury. The maximum penalties for these charges could result in lengthy prison sentences and substantial fines. Schatt and Podulka have already made initial court appearances, with Alexander’s appearance pending. The legal proceedings are taking place in the Northern District of California.
The DOJ’s actions against the former Cred executives are part of a broader effort to crack down on fraudulent activities within the cryptocurrency industry. Recent cases include charges against prominent figures like Roger Ver for alleged tax evasion and the founders of Samourai Wallet for privacy-related violations.
When Cred filed for bankruptcy in November 2020, customers had already suffered losses amounting to $150 million. However, with the recent increase in crypto market value, these losses have surged to over $783 million. The DOJ’s commitment to bringing justice to those involved in fraudulent schemes underscores the importance of maintaining integrity and security within the crypto space.
