Two former executives of the now bankrupt crypto lending company, Cred, have pleaded guilty to wire fraud as part of the requirements of their plea deal.
The former CEO and CFO of Cred, Daniel Schatt and Joseph Podulka, have pleaded guilty to fraud charges in a federal court. The crypto executives are now facing legal action over their offenses.
Cred execs enter guilty plea
Daniel Schatt, Cred’s co-founder and former CEO, and Joseph Podulka, the company’s former CFO, admitted in a San Francisco federal court that they misled their customers about the company’s financial health and lending practices, which led to losses exceeding $150 million.
Their admission of guilt was part of the requirements of their plea deal with prosecutors, according to a May 13 text filing in a California District Court.
Cred was established in 2018 and offered high-yield returns to cryptocurrency investors through its “CredEarn” program. However, court documents show that both Schatt and Podulka falsely assured their customers of the safety and collateralization of their funds.
Rather than engaging in secure lending practices, a significant portion of Cred’s assets was poured into a single entity, MoKredit, a Chinese micro-lender specializing in unsecured loans to gamers.
The accused Cred executives never disclosed to their customers that most of their assets were being sent to a microlender.
The executives were warned about the company’s solvency, but they continued to assure customers of Cred’s financial stability, encouraging further investments and discouraging withdrawals.
Executives face legal action for misleading investors
District Judge William Alsup accepted the plea deals from both former executives and set a sentencing hearing for August 26, 2025. Both of them are facing up to 20 years in prison and $250K in fines for each count of wire fraud.
Schatt and Podulka are facing 13 charges of wire fraud and money laundering.
Law360 reported that as a term in the plea agreement, Schatt and Podulka were required to admit that they selectively presented positive “information [while] failing to disclose negative news” with the intent to “induce customers to lend their US currency and digital currencies to Cred.”
Federal prosecutors have sent in a list of possible sentences for the two in the range of up to 72 months for Schatt and up to 62 months for Podulka. Cred’s former chief commercial officer, James Alexander, is also facing charges of wire fraud and money laundering.
When Cred collapsed and filed for bankruptcy, its customers suffered losses of up to $150M, but the U.S. Department of Justice stated in May 2024 that the assets had a market value that exceeded $783M.
Cred allegedly claimed to only engage in collateralized lending and that all its crypto investments were safe, which prosecutors say was false.
According to the prosecutors, after the price of Bitcoin dropped by 40% on March 11, 2020, Cred could not meet its margin calls and neared insolvency. Yet, the three executives tried to attract new customers while being dishonest about the risks.
Also, as a part of the plea agreement, the defendants agreed that their actions led to losses of between $65M and $150M for their investors.
Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
