Former Cred executive charged with wire fraud and money laundering

Three former executives of bankrupt cryptocurrency lender Cred have been indicted on charges of engaging in wire fraud and money laundering before the company declared bankruptcy in November 2020.

“This prosecution demonstrates our resolve to protect our markets from fraudsters and keep investors safe,” the U.S. Attorney’s Office for the Northern District of California said in a May 3 statement.

Former CEO Daniel Schatt and CFO Joseph Podulka face 13 counts of wire fraud and money laundering, while CCO James Alexander faces four counts.

“This case highlights a predatory and deceptive scheme to defraud potential victims out of hundreds of millions of dollars in market value in cryptocurrency,” said Mark Mosley, Special Agent in Charge of IRS Criminal Investigation.

When Cred declared bankruptcy in November 2020, Cointelegraph reported that numerous users took to social media to express concerns and ask “whether their funds are safe.”

Prosecutors allege the three executives misled customers about Cred’s lending and investment practices.

Cred reportedly claimed that it only engages in “collateralized or guaranteed lending,” that its cryptocurrency investments are “hedged,” and that it maintains an “all-weather approach” to its investments to protect against volatility.

However, prosecutors argued that Cred made loans “without collateral or guarantee.”

Related: Bankrupt cryptocurrency lender Genesis seeks approval to sell $1.6 billion worth of trust assets

Schatt and Podulka had their first court appearance on May 2 and must return on May 8 to file their appeal. Alexander’s first court date has not yet been set.

The charges come as the former CEO of cryptocurrency lender Alex Mashinsky prepares for a sentencing hearing in September 2024, and faces seven felony charges since the company went bankrupt in July 2022.

Meanwhile, Genesis, another cryptocurrency lending company that filed for bankruptcy in January 2023, is working to resolve its debts with creditors. On April 2, Genesis liquidated approximately 36 million GBTC shares, generating $2.1 billion in Bitcoin.

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