A federal judge has sentenced Cred’s top executives to prison. CEO Daniel Schatt received a four-year sentence, while CFO Joseph Podulka was given three years, reports Decrypt.
Founded in 2018, the platform offered US dollar loans backed by cryptocurrency and accepted deposits in digital assets with promises of returns. Investigations revealed that Cred’s executives redirected 80% of user funds into high-risk microloans for Chinese gamers through an affiliated company.
The scheme collapsed during the 2020 crypto market crash. However, Schatt continued to claim that the platform was operating normally and was fully solvent. In October of that year, the Cred team reported the loss of client assets due to fraud.
In November, the company began bankruptcy proceedings. That same month, a US court denied creditors’ requests to freeze Cred’s assets.
Schatt and Podulka appeared in court on May 2, 2024. They pleaded guilty to conspiracy to commit money laundering and fraud.
Their actions affected over 440,000 users. At the time of the incident, the total damage was estimated at $140 million. Based on current digital asset valuations, it amounts to $1 billion.
The former Cred executives will begin serving their sentences on October 28. Hearings for client restitution are scheduled for October 7. In addition to prison time, the judge ordered each to pay a $25,000 fine.
Earlier in August, the founders of HashFlare asked the court not to imprison them for a $577 million fraud.