Federal leaders of Cred LLC have received sentences in a cryptocurrency fraud case handled by federal courts.
In a landmark case, two former executives of Cred LLC, Daniel Schatt and Joseph Podulka, were sentenced to a combined 88 months in federal prison for their involvement in the company's November 2020 collapse. The U.S. Attorney, Craig Missakian, stated that the executives' scheme had seriously harmed Cred's customers.
Cred LLC, a company that allowed customers to deposit cryptocurrency to earn interest and also offered loans using crypto as collateral, secretly relied on a Chinese company, linked to one of its co-founders, to generate interest. This company used customer funds to make short-term, high-interest loans to gamers in China. When the COVID-19 pandemic hit in March 2020 and Bitcoin prices dropped, both Cred's hedging arrangement and its arrangement with the Chinese company failed.
Schatt, the Co-Founder and CEO of Cred LLC, was sentenced to 52 months in federal prison, while Podulka, the Chief Financial Officer, was sentenced to 36 months. In addition to their prison sentences, they were each given three years of supervised release and fined $25,000. The defendants will start their prison sentences on October 28, 2025, and a restitution hearing is scheduled for October 7, 2025.
Prosecutors accused Schatt and Podulka of presenting an incomplete and misleading, positive portrayal of Cred's business while failing to disclose information about Cred's business challenges and risks. Cred's finances collapsed, but the executives assured the public the company was "operating normally."
The Chinese company could not repay tens of millions of dollars, leading to Cred's bankruptcy filing in November 2020. More than 6,000 customers and investors filed claims of around $140 million in losses. Prosecutors said these losses would now be worth over $1 billion given current crypto prices.
A separate hearing in October 2025 will determine how much restitution Schatt and Podulka must repay. The third board member of Cred LLC, who was charged along with Daniel Schatt and Joseph Podulka in connection with the company's collapse, is Michael S. Hsueh.
U.S. Attorney Craig Missakian emphasised that fraud targeting crypto investors will not be tolerated. The case serves as a stark reminder for all companies in the crypto space to maintain transparency and integrity in their operations.
