Two former executives of San Francisco-based crypto lender Cred LLC have been indicted in relation to the company’s November 2020 collapse. Daniel Schat and Joseph Podulka were collectively sentenced to 88 months in prison for the wire fraud conspiracy.
As per the U.S. Attorney’s Office, Northern District of California’s press release, Daniel Schatt, the company’s Co-Founder and CEO, was sentenced on Friday to 52 months in federal prison, while Joseph Podulka, the Chief Financial Officer, received 36 months. The two, along with former Chief Capital Officer James Alexander, were charged last year.
Schatt and Podulka were accused of conspiring to present an incomplete and misleading, positive portrayal of Cred’s business while failing to disclose information about Cred’s business challenges and risks. U.S. Attorney Craig Missakian said the executives’ scheme seriously harmed Cred’s customers and warned that fraud targeting crypto investors will not be tolerated.
The Conspiracy and Impact
Cred allowed customers to deposit cryptocurrency to earn interest and also offered loans using crypto as collateral. However, the business model relied heavily on two risky arrangements.
Prosecutors explained that Cred secretly relied on a Chinese company, linked to one of its co-founders, to generate interest. This company used customer funds to make short-term, high-interest loans to gamers in China. At the same time, Cred used a third-party hedging firm to protect against crypto market fluctuations.
When the COVID-19 pandemic hit in March 2020 and Bitcoin prices dropped, both arrangements failed. The hedging partner forced Cred to liquidate its positions, and the Chinese company said it could not repay tens of millions of dollars. Cred’s finances collapsed, but instead of warning customers, Schatt and Podulka assured the public the company was “operating normally.”
In November 2020, Cred filed for bankruptcy. More than 6,000 customers and investors
filed claims of around $140 million in losses, which prosecutors said would now be worth over $1 billion given current crypto prices. Authorities said the executives misled investors and customers in an attempt to cover up the company’s failure.
Along with prison sentences, Schatt and Podulka each received three years of supervised release and were fined $25,000. A separate hearing in October 2025 will determine how much restitution they must repay.
The defendants will start their prison sentences on October 28, 2025, and a restitution hearing is scheduled for October 7, 2025.
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