Three Former Cred LLC Executives Indicted in Alleged $780M Crypto-Related Wire Fraud Conspiracy

News | May 21, 2024 By:

On Friday, May 3, 2024, the U.S. Attorney’s Office, Northern District of California announced charges against three former executives of the cryptocurrency investment firm Cred LLC in an alleged multi-million dollar fraud scheme.

Daniel Schatt, the former CEO, Joseph Podulka, the ex-CFO, and James Alexander, Cred’s former Chief Capital Officer, were indicted by a federal grand jury on charges of wire fraud conspiracy and other related crimes. According to court documents, the defendants are accused of defrauding Cred customers and investors out of cryptocurrency assets valued at over $780 million through false statements about the company’s financial condition and practices.

Cred LLC was a San Francisco-based firm that provided loans using cryptocurrencies like bitcoin as collateral and offered yield-generating deposits for coins deposited by customers. Prosecutors claim that starting in March 2020, Schatt, Podulka, and Alexander began telling investors that Cred only engaged in secured lending and maintained prudent hedging strategies to protect against volatility in crypto markets.

However, the indictments state these claims were false and that Cred’s lending was actually unsecured. In addition, the company lost its hedging partner, and over $40 million was deemed uncollectable from one major borrower after a “flash crash” in March 2020 significantly devalued cryptocurrencies. Cred was also facing legal threats and was effectively insolvent at this point, according to court documents.

Despite knowing Cred’s dire financial situation, the defendants continued to assure customers the company was stable and their funds safe. They are accused of using new investment deposits to keep the business running and discouraging existing clients from withdrawing their coins. Cred eventually filed for bankruptcy in November 2020 with over $150 million in customer cryptocurrency losses.

For their part, Schatt and Podulka are charged with 13 counts of wire fraud stemming from transactions between April and October 2020 when they allegedly continued lying to investors. Alexander faces similar conspiracy and fraud charges over communications with Cred clients in May and June 2020 before he was terminated. He is also accused of stealing approximately 225 bitcoin worth millions from Cred days after his firing.

If convicted, the defendants each face a maximum 20-year prison sentence for wire fraud conspiracy and additional penalties for money laundering and other charges. A spokesperson for the U.S. Attorney’s Office stated they are committed to protecting investors and maintaining fair markets free of fraudulent schemes. All parties are presumed innocent unless and until proven guilty.