Crypto Collapse Confession: Ex-Cred Executives Admit to $150M Fraud Scheme.

In a San Francisco federal court on May 13, 2025, former Cred Inc. executives Daniel Schatt, co-founder and CEO, and Joseph Podulka, CFO, pleaded guilty to wire fraud conspiracy, admitting they misled customers about the crypto lender’s financial stability.

The scheme, which unraveled during Cred’s 2020 bankruptcy, cost customers up to $150 million in crypto deposits. U.S. District Judge William Alsup described the executives’ actions as a deliberate effort to paint an “unreasonably positive” picture of Cred’s operations, selectively sharing positive updates while concealing critical financial risks.

The guilty pleas are an important step in one of the crypto industry’s most high-profile fraud cases, with Schatt facing up to 72 months in prison and Podulka up to 62 months.

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The Fall of Cred: A Perfect Storm

Cred’s collapse was triggered by a series of financial missteps, beginning with the March 2020 Bitcoin flash crash, when the cryptocurrency’s value plummeted 40% in a single day, wiping out $750 million in market value.

Schatt acknowledged in court that the crash left Cred unable to meet margin calls, pushing the company to attract new customer funds while discouraging withdrawals to stay afloat.

The situation deteriorated further when MoKredit, a Chinese microloan platform and Cred’s primary borrower, failed to repay a $40 million loan. Court documents reveal that Cred had funneled approximately 80% of customer assets into MoKredit, tying the company’s solvency to a high-risk borrower.

Despite knowing MoKredit’s repeated failures to repay, Cred executives continued to withhold this information from customers, exacerbating the financial fallout.

Did You Know?
In 2020, Cred became the first major U.S.-based crypto lending platform to file for bankruptcy, joining a list of high-profile crypto failures like Mt. Gox in Japan and Quadriga in Canada.

Customer Losses and Additional Scandals

When Cred filed for bankruptcy in October 2020, over 6,000 customers submitted claims totaling more than $140 million. Internal misconduct, including the alleged theft of $2 million worth of Bitcoin by Chief Capital Officer James Alexander, compounded the company's downfall.

A separate indictment against Alexander was unsealed in 2024, adding to Cred’s legal woes. Schatt also admitted the company fell victim to a “sham” that cost it 800 BTC, worth over $9 million at the time.

Recent data indicates that Cred’s collapse remains a cautionary tale in the crypto lending space, with ongoing discussions about the need for stricter regulatory oversight in decentralized finance platforms.

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Sentencing and Industry Implications

Prosecutors have recommended sentences of 72 months for Schatt and 62 months for Podulka, with a sentencing hearing scheduled for August 26, 2025. The case underscores the volatility and risks of the crypto lending industry, particularly during market downturns. As the crypto market continues to recover, Bitcoin traded at approximately $103,400 on May 14, 2025, per recent price data.

The Cred scandal serves as a clear example of the importance of transparency and due diligence in crypto investments. The fallout from Cred’s collapse has fueled calls for enhanced consumer protections, with regulators likely to scrutinize similar platforms more closely in the wake of this case.