In a dramatic turn of events for the now-defunct crypto lender Cred, two of its top former executives have admitted to wire fraud charges linked to the company’s high-profile bankruptcy. Daniel Schatt, once the CEO, and Joseph Podulka, the former CFO, entered guilty pleas in a California federal court on May 13 as part of a deal with prosecutors.
U.S. District Judge William Alsup accepted their pleas, scheduling sentencing for August 26. The charges stem from actions the pair took while leading Cred, a company that lured customers with promises of safe and structured crypto lending, but ultimately left investors with massive losses.
Wire fraud is a serious federal offense, carrying potential penalties of up to 20 years in prison and fines of $250,000 per individual—or double that amount for businesses. According to the plea agreements filed with the court, Schatt and Podulka misrepresented the financial health of Cred and actively withheld negative information, giving a false impression of the company’s stability in order to secure customer deposits.
Deliberate Deception and Unfolding Financial Disaster
Federal prosecutors outlined that Schatt and Podulka manipulated information presented to customers by highlighting only the positives while omitting troubling financial realities. This tactic, they said, was part of a broader plan to keep customer capital flowing in, even as the company was teetering on the edge.
As part of the plea, Schatt acknowledged responsibility for losses that federal authorities estimated ranged between $65 million and $150 million. Cred’s overall customer losses were pegged at up to $150 million when it filed for Chapter 11 bankruptcy in November 2020. However, due to the appreciating value of crypto assets since the time of the collapse, the U.S. Department of Justice has said the asset pool now exceeds $783 million in market value as of May 2024.
Schatt could now face a sentence of up to 72 months, while Podulka may see up to 62 months behind bars, according to sentencing recommendations submitted by the prosecution. The two were initially facing 13 counts, including wire fraud and money laundering.
A House of Cards Built on Risky Loans and Misleading Claims
A critical part of the government’s case involved Cred’s opaque lending practices. Prosecutors pointed to the company’s deep exposure to a Chinese entity, MoKredit, which specialized in issuing unsecured microloans to Chinese gamers. This dependency on risky, unsecured loans was not disclosed to investors, despite Cred’s public assurances that it only engaged in collateralized lending and that all investments were hedged.
The situation worsened dramatically on March 11, 2020, when Bitcoin’s price plunged by 40%. Cred was unable to meet its margin calls, spiraling into near-insolvency. Rather than come clean, the leadership team, including Schatt and Podulka, allegedly continued to court new customers without revealing the underlying financial distress.
Wider Implications in the Crypto Space
Cred’s collapse left a scar on the crypto lending industry, eroding trust at a time when regulation and accountability were already under scrutiny. Social media at the time buzzed with frantic questions from customers wondering if their assets were lost forever.
Their fears weren’t unfounded. As it turned out, Cred was not alone in its downfall. In a broader trend of reckoning within the crypto space, other founders have also found themselves facing justice. Notably, Alex Mashinsky, former CEO of Celsius, was sentenced to 12 years in prison on May 8 for fraudulent activity tied to his own failed crypto lending platform.
Earlier in the year, Travis Ford, co-founder and head trader at Wolf Capital, pleaded guilty to wire fraud conspiracy for raising over $9 million through deceptive investor promises.
Looking Ahead
As sentencing for Schatt and Podulka approaches, the crypto world watches closely. Their convictions mark yet another cautionary tale of how ambition, mismanagement, and deception can unravel digital finance ventures—and devastate the very users they claimed to empower.
