Cred LLC executives sentenced to prison for fraud
A San Francisco court has sentenced former Cred LLC executives for defrauding over 6,000 investors in a $140M cryptocurrency lending scheme.
The court sentenced its former executives, finding them guilty of wire fraud. This is stated in an official press release published on the Department of Justice website.
Federal Prosecutor Ismail Ramsey emphasized that the defendants, Daniel Schatt and Joseph Podulka, who held key executive positions, deliberately and purposefully misled their investors. They presented the company as a financially stable and prosperous enterprise capable of generating significant profits. In reality, Cred, LLC was bankrupt in late 2020. As a result of their actions, investors lost their money invested in digital assets. According to the prosecution, over 6,000 defrauded clients filed a class-action lawsuit for damages, which in total exceeded $140M.
After a sharp market crash in March 2020, linked in part to the onset of the COVID-19 pandemic, the company suffered significant losses. Schatt and Podulka used their authority to attract funds, knowingly hiding the company's true financial performance from clients, including lack of liquidity. The prosecution stressed that this case demonstrates the readiness of federal authorities to actively prosecute cases of fraud in the digital asset sphere, even when they occur in a volatile and complex environment.
Daniel Schatt and Joseph Podulka orchestrated a scheme in which they deceived both investors and customers out of their hard-earned funds in an attempt to extend a failing business. The FBI is committed to investigating investment fraud schemes targeting cryptocurrency holders and working with our partners to hold wrongdoers accountable,said Acting FBI Special Agent in Charge Matt Cobo.
Schatt (CEO) received four years, Podulka (CFO) three years, and Alexander (Commercial Director) a suspended sentence. Commercial Director, James Alexander, received a suspended sentence. The former executives pleaded guilty and are obligated to pay restitution to the affected investors who suffered multi-million dollar losses as a result of their actions. In addition to the prison sentence, they have been assigned additional periods of supervised release after their sentences.
The Cred LLC case is a stark reminder of the risks in an underregulated crypto market. Even though it wasn’t a Ponzi scheme - and the executives may not have set out to deceive - hiding losses and raising new funds to keep the business alive was still considered fraud.
The lesson for investors: never dismiss DYOR — always verify the figures yourself, regardless of a company's reputation or media hype.
Recommended