Daniel Schatt and Joseph Podulka, former CEO and CFO of the now-bankrupt crypto lending firm Cred LLC, have pleaded guilty to wire fraud charges tied to the company’s dramatic collapse in 2020.
The U.S. Department of Justice announced their pleas as part of an ongoing investigation into misconduct that contributed to major investor losses during the height of the crypto lending boom.
Cred, based in San Mateo, California, filed for Chapter 11 bankruptcy on November 7, 2020, revealing widespread financial mismanagement and hidden losses.
According to court filings and the defendants’ admissions, both Schatt and Podulka misrepresented the company’s financial health and lending practices to customers and partners in the months leading up to its failure.
District Judge William Alsup accepted the guilty pleas from Schatt and Podulka and scheduled their sentencing for August 26.
While wire fraud carries a maximum penalty of 20 years in prison and fines of up to $250,000 for individuals and $500,000 for businesses, federal prosecutors have recommended lighter sentences, up to 72 months for Schatt and 62 months for Podulka.
False Assurances and Hidden Losses: Inside Cred’s Risky Lending Practices
Between March and October 2020, Cred LLC marketed itself as a disciplined crypto lender, claiming to issue only “collateralized or guaranteed” loans and maintain strong risk management practices.
But court records, internal documents, and testimony revealed a different reality. Many of the company’s loans were unsecured, risky, and poorly vetted.
Cred also assured customers that it hedged against market volatility and held insurance to protect deposits. These claims were later exposed as false.
In February 2020, the company lost over $8 million to a scam and soon after loaned $40 million to a borrower who defaulted.
Cred’s collapse accelerated after Bitcoin plunged 40% on March 11, 2020, triggering margin calls the company couldn’t meet.
Rather than acknowledge the risks, the executives allegedly doubled down seeking new deposits while continuing to mislead customers about the company’s financial health.
Prosecutors described this as a deliberate scheme to defraud depositors and delay public awareness of the company’s massive financial shortfalls.
Court filings say the pair concealed major losses and ignored internal warnings from staff.
These actions contributed to user losses estimated between $65 million and $150 million and possibly more than $780 million in total market value, according to the Department of Justice.
Prosecutors also charged former chief commercial officer James Alexander with wire fraud and money laundering.
They allege Cred misrepresented its reliance on high-risk lending, including a significant portion of its portfolio tied to MoKredit, a Chinese firm issuing unsecured microloans to gamers.
Regulators Tighten Grip on Crypto Lending Scandals
U.S. authorities are ramping up pressure on the digital asset industry, with a growing number of enforcement actions aimed at executives behind failed crypto lending platforms.
These moves indicate the effort to hold industry leaders accountable for misleading investors and mismanaging customer funds.
In one of the most high-profile cases this year, Celsius founder and former CEO Alex Mashinsky was sentenced to 12 years in prison on May 8 for defrauding customers.
Similarly, Travis Ford, co-founder and head trader at Wolf Capital, pleaded guilty in January to wire fraud conspiracy after raising over $9 million based on false promises of high returns.
The crypto lending sector exploded between 2019 and 2021, attracting billions of dollars from retail and institutional investors.
Many platforms offered attractive yields while operating in regulatory gray areas, relying on opaque internal models and private agreements instead of clear oversight.
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