On May 3The US DOJ announced charges against former executives of Cred, a bankrupt crypto lending and investment company.
Authorities alleged that the three people charged – Cred co-owner and former CEO Daniel Schatt, former CFO Joseph Podulka and former business manager James Alexander – participated in a scheme that caused customers to lose crypto holdings currently worth over $783 million.
Acting Special Agent in Charge of IRS Criminal Investigation Mark Mosley called the Cred defendants' suspected activities a “predatory and deceptive scheme.”
Allegedly false statements
Cred offered US dollar loans to customers who deposited cryptocurrencies as collateral. Secondly, it promised a return or interest to customers who deposited their crypto.
However, as late as March 2020, the former executives allegedly made numerous false statements, claiming that Cred only engaged in collateralized and collateralized lending, used hedged crypto investments, and had volatility protection by all the temperature.
Marketing materials were allegedly falsely advertised. Cred was an approved lender with comprehensive insurance. Additionally, executives allegedly presented Cred as solvent after a flash crash in 2020 and promised that insurance would make customers whole.
Even though Cred's general counsel admitted potential insolvency, executives reportedly sought new client funds instead of revealing details of the company's financial situation.
Executives also allegedly failed to disclose that customer returns were almost entirely produced by a single company that provided microloans to Chinese players.
Long maximum sentence
A federal grand jury indicted each of the three individuals on various counts of conspiracy, wire fraud and money laundering. The various charges combined carry maximum penalties amounting to decades in prison and millions of dollars in fines.
Schatt and Podulka first appeared in court on May 2 and will return on May 8, including to enter pleas. Alexander's first court appearance is expected.
The case is ongoing in the Northern District of California, which also announced a guilty plea from BTC-e operator Alexander Vinnik on the same day.
The DOJ recently announced two more cases: one against the Bitcoin proponent. Roger Ver for alleged tax evasion in the Central District of California and one against the founders of the privacy-guaranteed crypto wallet Samurai wallet in the Southern District of New York.