Cred’s bankruptcy brings serious doubts to the surface
Three former executives of now-bankrupt cryptocurrency lender Cred have been indicted on charges of wire fraud and money laundering, the U.S. Attorney’s Office for the Northern District of California announced. The charges come after the company declared bankruptcy in November 2020, sparking widespread concern and investigation.
Billing Details
Prosecutors issued a statement on May 3, emphasizing the seriousness of the charges and their commitment to maintaining market integrity. Former CEO Daniel Schatt and CFO Joseph Podulka each face 13 charges, including wire fraud and money laundering. CCO James Alexander was indicted on four counts in connection with similar allegations. Mark Mosley, Acting Special Agent in Charge of IRS Criminal Investigation, described the executives’ actions as a “predatory and deceptive scheme” and accused them of defrauding victims out of hundreds of millions of dollars in cryptocurrency.
Allegations of misleading practices and bankruptcy fallout.
According to prosecutors, executives misled customers about Cred’s lending and investment practices by falsely claiming that Cred only made “collateralized or guaranteed loans” and that its cryptocurrency investments were “hedged.” While these guarantees were intended to suggest a robust strategy to combat market volatility, it was argued that the reality in relation to unsecured lending practices was significantly different.
Court appearances and legal proceedings
Schatt and Podulka made their first court appearance on May 2 and are scheduled to appear in court again on May 8 to enter pleas. A date for Alexander’s first court appearance has not yet been set, adding another layer of complexity to the unfolding legal drama. These charges are unfolding alongside other high-profile cryptocurrency lending controversies, including the upcoming sentencing of Alex Mashinsky, the former CEO of another cryptocurrency lender, scheduled for September 2024.
Broad Impact on the Cryptocurrency Lending Industry
The lawsuit against former Cred executives highlights ongoing problems within the cryptocurrency lending industry, where several companies, such as Genesis, have faced severe financial difficulties leading to bankruptcy. On a related note, Genesis recently made headlines for liquidating approximately 36 million GBTC shares in an effort to resolve debt with creditors, generating $2.1 billion in Bitcoin.