Correction! An earlier version of this article mistakenly used an image with a logo of India-based financial company Cred. We clarify that this article is about the now-bankrupt crypto lender Cred, which has no association with the Indian brand of the same name. CoinChapter regrets the error.
NAIROBI (CoinChapter.com) — Former Cred executives face wire fraud and money laundering charges. Three executives face criminal charges related to Cred’s bankruptcy. The Department of Justice alleges executives misled investors about lending practices, leading to staggering losses.
On May 3, 2024, a federal grand jury indicted former Cred CEO Daniel Schatt, CFO Joseph Podulka, and CCO James Alexander with conspiracy to commit wire fraud, wire fraud, and money laundering. The indictments stem from an alleged scheme that defrauded Cred’s clients, leading to the company’s 2020 bankruptcy and customer losses potentially exceeding $780 million in cryptocurrency assets.
Former CRED Executives: Initial Court Appearances
Schatt and Podulka appeared in court for the first time on May 2 and must return to enter their pleas on May 8. Alexander’s initial court date has not been set. The charges against the former Cred executives come as other crypto lending firms, like Celsius and Genesis, grapple with bankruptcy proceedings and legal battles.
Specifically, Daniel Schatt, the former CEO of the bankrupt crypto lender Cred, and Joseph Podulka, the CFO, have been charged with 13 counts of wire fraud and money laundering. Additionally, James Alexander, the former Chief Compliance Officer, faces four counts. If convicted, each charge carries a maximum sentence of 20 years in federal prison.
“This prosecution demonstrates our determination to keep our markets free of fraudsters and safe for investors,” the U.S. Attorney’s Office for the Northern District of California stated.
IRS Criminal Investigation Acting Special Agent in Charge Mark Mosley emphasized the severity of the alleged actions, stating,
“It highlights a predatory, deceptive scheme defrauding potential victims of hundreds of millions of dollars of cryptocurrency at market value.”
Alleged Misappropriation and Cover-Up Attempts
James Alexander, Cred’s former Chief Capitol Officer, faces charges for allegedly stealing approximately 225 bitcoins from the company on his termination day. The indictment claims he converted some bitcoins to U.S. dollars and then used the funds for personal expenses and deposits.
Meanwhile, Schatt and Podulka allegedly hid significant company losses from customers. They only revealed the truth in October 2020 when a cryptocurrency exchange inquired about Cred’s finances. The exchange reportedly discovered Cred’s lack of hedges, poor asset-to-liability ratio, and the $8 million Alexander scam loss.
Above all, the downfall of Cred and the executives’ charges comes amid a cascade of problems for crypto lenders. In 2022, Celsius’s CEO Alex Mashinsky was also charged with fraud, and the firm filed for bankruptcy. More recently, another major lender, Genesis, became insolvent in January 2023. Certainly, the Cred case underscores the heightened risks present within the cryptocurrency lending landscape.
