Two former executives behind the collapsed crypto lender Cred have admitted to misleading customers, triggering a financial disaster that wiped out up to $150 million in digital assets.
In a San Francisco federal courtroom, Cred’s co-founder and ex-CEO Daniel Schatt, alongside former CFO Joseph Podulka, pleaded guilty to wire fraud conspiracy.
Both confessed to knowingly hiding the company’s mounting troubles while painting a false image of financial stability during 2020.
Cred’s troubles began during the sudden Bitcoin crash in March 2020, when prices fell by 40% in a single day.
The company, already heavily exposed, could not meet its margin calls.
Schatt told the court,
“Bitcoin took a precipitous fall, creating a risk for Cred.”
The firm tried to stay afloat by attracting new customer deposits and discouraging withdrawals.
Cred's co-founder and ex-CEO Dan Schatt during an AMA session five years ago.
Yet the market crash only exposed deeper cracks in Cred’s foundation.
According to court records, Cred had poured around 80% of its customer assets into a little-known Chinese firm called MoKredit.
The company, co-founded by Cred’s other co-founder Lu Hua, issued unsecured microloans to gamers in China.
MoKredit frequently failed to repay Cred, but executives chose not to disclose the mounting debt.
U.S. District Judge William Alsup said Schatt, Podulka and others “acted together with the common goal of presenting an incomplete, unreasonably positive and thus misleading portrayal” of Cred’s financial health.
The plea agreement revealed that both men admitted to showing only favourable data while withholding negative developments to convince users to deposit their funds.
Prosecutors said the two made claims that all crypto investments were hedged and lending was collateralised—assertions later found to be false.
Court documents further detailed how the company's downfall was hastened by a $40 million shortfall tied to MoKredit’s inability to repay loans.
Cred also lost 800 Bitcoin in a separate scam, valued at over $9 million at the time.
Additionally, former Chief Capital Officer James Alexander was accused in a separate indictment of stealing Bitcoin worth $2 million during the firm’s collapse.
Cred filed for bankruptcy in November 2020, with over 6,000 customers submitting claims that exceeded $140 million.
The total loss was later estimated to be between $65 million and $150 million.
Despite this, the U.S. Department of Justice said in 2024 that the market value of the missing crypto had since risen to over $783 million.
Schatt and Podulka each faced 13 criminal charges, including money laundering and wire fraud.
As part of the plea deal, prosecutors recommended a sentence of up to 72 months for Schatt and 62 months for Podulka.
Both plead guilty on 13 May. (Source: PACER)
Their sentencing is scheduled for 26 August by Judge William Alsup.
The case adds to a string of legal actions against crypto executives this year.
On 8 May, Celsius founder Alex Mashinsky was sentenced to 12 years for fraud.
In another case, Wolf Capital’s co-founder Travis Ford pleaded guilty in January to a $9 million investor fraud scheme.
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