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US DOJ Files Charges Against Former Cred Executives
The United States Department of Justice announced on May 3 that it has filed charges against former executives of Cred, a now-defunct crypto lending and investing firm. The accused individuals include Daniel Schatt, the co-owner and former CEO of Cred, as well as former CFO Joseph Podulka, and former CCO James Alexander. The authorities have alleged that these individuals were involved in a scheme that resulted in customers losing crypto assets valued at over $783 million.
Suspected Deceptive Practices
According to the allegations, Cred offered loans denominated in US dollars to customers who provided their crypto holdings as collateral. In addition to the loans, Cred also promised interest or yield to customers who deposited their crypto with the firm. However, the former executives are accused of making false statements as early as March 2020.
The executives allegedly misrepresented Cred’s operations by claiming that the firm engaged only in collateralized and guaranteed lending, utilized hedged crypto investments, and was protected against market volatility. In marketing materials, Cred was falsely advertised as a licensed lender with comprehensive insurance coverage. Despite this, the firm’s General Counsel reportedly admitted to potential insolvency, while the executives continued to attract new customer funds without disclosing the full financial picture.
Legal Consequences
A federal grand jury has leveled charges against the individuals involved, including conspiracy, wire fraud, and money laundering. The combined charges could carry severe penalties, including lengthy prison sentences and substantial fines. While Schatt and Podulka have already appeared in court and are scheduled to return for plea hearings, Alexander’s initial court appearance is yet to come.
The case is being handled by the Northern District of California, where another significant crypto-related legal proceeding occurred on the same day involving Alexander Vinnik, operator of the defunct exchange BTC-e. In recent times, the Department of Justice has also announced legal actions against other notable figures in the crypto industry, such as Roger Ver for alleged tax evasion and the founders of Samourai Wallet for their involvement in privacy-focused crypto services.
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