Cred LLC Executives Sentenced for $1B Crypto Fraud Conspiracy

Daniel Schatt, co-founder and CEO of cryptocurrency lender Cred LLC, and Joseph Podulka, the company's CFO, have been sentenced to 52 and 36 months in federal prison, respectively, for their roles in a wire fraud conspiracy that led to over $1 billion in customer losses. The executives pleaded guilty to conspiring to mislead customers by presenting an overly positive portrayal of Cred's business while concealing significant financial risks and challenges. Cred's business model involved accepting cryptocurrency deposits for interest and offering loans secured by crypto collateral, relying heavily on a Chinese firm founded by one of Cred's co-founders to generate interest through high-interest microloans to gamers in China, a fact not disclosed to customers. The collapse began in March 2020 amid the COVID-19 pandemic and a sharp drop in Bitcoin prices, which triggered the failure of both the hedging strategy and the Chinese firm's repayments, leading to Cred's bankruptcy in November 2020. Prosecutors emphasized that the executives' fraudulent actions caused significant harm to more than 6,000 customers and investors, and warned that cryptocurrency fraud will be aggressively prosecuted. Along with prison sentences, Schatt and Podulka received supervised release and fines, underscoring accountability in the rapidly evolving crypto financial sector.