Cred Inc.’s Former CEO and CFO Plead Guilty in $150M Crypto Fraud
On Tuesday, May 13, 2025, Law360 reported that two former executives of the bankrupt cryptocurrency investment platform Cred Inc. admitted guilt in a California federal court to charges of conspiracy to commit wire fraud.
Former CEO Daniel Schatt and former Chief Financial Officer Joseph Podulka acknowledged misleading customers by presenting an overly optimistic view of the company’s financial health before its collapse, which prosecutors say resulted in customer losses of up to $150 million in cryptocurrency assets.
In court, Schatt and Podulka confirmed to U.S. District Judge William Alsup that in 2020, they worked with others to selectively share positive information about Cred while withholding negative developments. Their plea agreements state this was done to encourage customers to lend U.S. dollars and digital currencies to the platform.
Judge Alsup noted that the federal statute for wire fraud carries a potential penalty of up to 20 years in prison. Prosecutors have recommended sentences of up to 72 months for Schatt and up to 62 months for Podulka. The judge accepted their guilty pleas and scheduled a sentencing hearing for August 26, 2025.
According to court documents, Cred promoted its lending business by promising customers returns on their cryptocurrency investments. However, the company failed to disclose that its loan portfolio heavily depended on MoKredit Inc., a Chinese firm issuing unsecured microloans to gamers. Prosecutors also alleged that Cred misrepresented its hedging strategies and insurance coverage, which were exposed as inadequate when Bitcoin’s price plummeted by approximately 40% on March 11, 2020, amid the COVID-19 pandemic.
Schatt, who co-founded Cred in 2017 with Lu Hua, both former PayPal employees, told the court that the Bitcoin crash created significant risks for Cred, particularly due to its reliance on MoKredit, its largest borrower. When MoKredit failed to repay a $40 million loan, Cred faced severe financial strain. Despite this, Schatt sent emails to customers claiming confidence in Cred’s risk management and market expertise, statements Judge Alsup highlighted as misleading during the hearing. Schatt confirmed these communications were inaccurate and failed to disclose MoKredit’s repayment issues, which critically impacted Cred’s viability.
The court also heard that Cred’s former Chief Capital Officer, James Alexander, misappropriated approximately $2 million in Bitcoin, contributing to the company’s woes. Prosecutors further noted a separate incident involving the loss of 800 Bitcoin, valued at over $9 million at the time, due to a fraudulent scheme. Alexander faces separate charges, including conspiracy to commit wire fraud, four counts of wire fraud, and eight counts of money laundering, after allegedly transferring 225 Bitcoin to his personal account following his termination in June 2020.
By October 2020, Cred filed for bankruptcy. In January 2021, over 6,000 claims totaling more than $140 million were filed by customers and investors in the bankruptcy proceedings. Prosecutors stated that at the time of the collapse, the market value of lost cryptocurrency was $150 million, though its value later peaked at over $783 million. Assistant U.S. Attorney Patrick Kevin O’Brien informed the court that the financial loss from the conspiracy ranged between $65 million and $150 million, affecting thousands of customers and some investors, with individual losses reaching several million dollars.
The indictment against Schatt and Podulka included one count of conspiracy to commit wire fraud, 13 counts of wire fraud, one count of money laundering, and one count of engaging in transactions to promote unlawful activity.
Source: Law360
