The former CEO and CFO of Cred are required to submit a plea by May 8 following their initial court hearings on May 2.
Before the company filed for bankruptcy in November 2020, three former executives of the bankrupt cryptocurrency lender Cred are accused of wire fraud and money laundering.
“This prosecution demonstrates our determination to keep our markets safe for investors and free of fraudsters,” the Northern District of California United States Attorney’s Office stated in a statement on May 3. James Alexander, the chief commercial officer, is charged with four counts of wire fraud, while former CEO Daniel Schatt and chief financial officer Joseph Podulka are facing thirteen charges each.
“It exposes a predatory, dishonest scheme that defrauds potential victims of hundreds of millions of dollars in cryptocurrency at market value,” stated Mark Mosley, the acting special agent in charge of criminal investigations at the Internal Revenue Service in the United States.
Many users reportedly took to social media after Cred filed for bankruptcy in November 2020 to express their worries and inquire as to “if their funds are safe.”. The three officials allegedly misled clients about Cred’s loan and investing procedures, according to the prosecution.
Cred purportedly stated that it only made “collateralized or guaranteed lending,” that it “hedged” its bitcoin holdings, and that it used a “all weather approach” to investing in order to guard against volatility.
Nonetheless, Cred allegedly made loans that “were neither collateralized nor guaranteed,” according to the prosecution. First appearing in court on May 2, Schatt and Podulka are required to return on May 8 to enter a plea. The initial court date for Alexander is still pending.
The accusations coincide with the September 2024 sentence hearing for former crypto lender CEO Alex Mashinsky, who is accused of seven felonies related to the company’s bankruptcy in July 2022.
Concurrently, Genesis, an additional cryptocurrency loan company that declared bankruptcy in January 2023, is attempting to reach a settlement with its creditors. Genesis made $2.1 billion from the sale of about 36 million shares of its Grayscale Bitcoin Trust on April 2.