tl;dr
Two former top executives of failed crypto lender Cred Inc., co-founder and former CEO Daniel Schatt and former CFO Joseph Podulka, pleaded guilty to federal wire fraud conspiracy charges. They admitted to misleading customers in 2020 about Cred's financial health and lending practices, contributing...
Two former Cred Inc. executives, co-founder and former CEO Daniel Schatt and former CFO Joseph Podulka, pleaded guilty to federal wire fraud conspiracy charges for misleading customers about the company's financial health in 2020, resulting in up to $150 million in crypto losses.
Cred's collapse began after the March 2020 Bitcoin flash crash, which caused a 40% drop and liquidated $750 million in a single day. Attempting to maintain stability, Cred attracted fresh customer funds but ultimately couldn’t meet margin calls.
The situation deteriorated due to a $40 million shortfall from unpaid loans tied to MoKredit, a high-risk borrower founded by another Cred co-founder. Cred had funneled approximately 80% of customer assets into MoKredit without disclosing repayment issues, tying its solvency directly to MoKredit's financial health.
Additional setbacks included the theft of about $2 million in Bitcoin by Cred’s Chief Capital Officer James Alexander, who allegedly absconded with the funds, and a separate $9 million loss from a fraudulent scheme involving 800 BTC.
Cred filed for bankruptcy in October 2020, with over 6,000 customer claims amounting to more than $140 million.
Prosecutors are seeking prison sentences of up to 72 months for Daniel Schatt and 62 months for Joseph Podulka, with sentencing scheduled for August 26. The executives admitted they deliberately painted a misleadingly positive picture of Cred’s financial status to encourage customer deposits while concealing critical negative information.