On May 3, the US Department of Justice (DOJ) revealed charges against former executives of Cred, a bankrupt cryptocurrency lending and investing firm.
Authorities claim that Daniel Schatt, Joseph Podulka, and James Alexander, the three individuals facing charges, participated in a scheme resulting in customers losing over $783 million worth of cryptocurrency.
Mark Mosley, Acting Special Agent in Charge of the IRS Criminal Investigation, described the actions of the accused at Cred as a “predatory, deceptive scheme.”
Accusations of Deception
Cred provided loans in US dollars to customers who used crypto as collateral. The former executives allegedly made false claims by guaranteeing collateralized lending, using hedged crypto investments, and having insurance to protect against volatility.
Marketing materials reportedly misrepresented Cred as a licensed lender with comprehensive insurance coverage. The executives portrayed the company as financially stable despite admitting potential insolvency and sought new customer funds without disclosing the full financial picture.
Additionally, it is alleged that customer yields were mainly generated from a single company providing micro-loans to Chinese gamers, a fact not disclosed by the executives.
Potential Legal Ramifications
A federal grand jury has charged the accused with conspiracy, wire fraud, and money laundering offenses that carry significant penalties, including lengthy prison sentences and substantial fines.
Schatt and Podulka appeared in court on May 2 and are scheduled to return on May 8 for further proceedings. Alexander’s court appearance is pending.
The case is being handled in the Northern District of California, where another high-profile cryptocurrency-related case involving Alexander Vinnik, the operator of BTC-e, recently saw a guilty plea entered.
These developments come as the DOJ has initiated legal action against other prominent figures in the cryptocurrency space, such as Roger Ver for tax evasion and the founders of Samourai Wallet for money laundering.
