Three former executives of the now-defunct cryptocurrency loan and investment company Cred are the subject of allegations from the US Department of Justice (DOJ), which claims they were part of a scam that caused consumers to lose their holdings in cryptocurrency, which are today worth over $783 million.
Daniel Schatt, the former CEO and co-owner of Cred, Joseph Podulka, the former CFO, and James Alexander, the former CCO, are among the accused. Acting Special Agent in Charge of IRS Criminal Investigation Mark Mosley called the defendants' purported actions at Cred a "predatory, deceptive scheme."
The accusations indicate that the executives began making false representations in March 2020 and continued for a number of months thereafter. They claimed that Cred was solely involved in guaranteed and collateralized lending, that it used hedged cryptocurrency assets, and that it had all-weather protection against volatility. It is also stated that marketing materials misrepresented Cred as a regulated lender with full insurance coverage.
According to IRS Criminal Investigation Acting Special Agent in Charge Mark Mosley, "the indictments levied demonstrate the investigative capabilities of IRS Criminal Investigation and our commitment to pursuing justice against financial criminals."
The executives purportedly guaranteed that insurance would make clients whole even after a 2020 flash crash and depicted Cred as solvent. The executives allegedly pursued fresh customer money rather than exposing Cred's actual financial status, even after the company's general counsel acknowledged facing possible insolvency.
It is also alleged that the executives neglected to reveal that almost all client yields were from a single business that provided microloans to Chinese gamers.
The three people were accused by a federal grand jury on several counts of conspiracy, wire fraud, and money laundering. The maximum punishments for all three counts combined were millions of dollars in fines and decades in prison.
Alexander's initial court appearance is still pending, while Schatt and Podulka had their first appearance on May 2 and are due back on May 8. The Northern District of California is where the case is currently pending.
"The United States is resolute in keeping our markets safe for investors and free of scammers, as this prosecution demonstrates," Counsel Ismail Ramsey.
The Department of Justice's declaration coincides with a slew of recent lawsuits aimed at individuals involved in the cryptocurrency space. These cases include accusations against Bitcoin proponent Roger Ver for allegedly evading taxes and against the creators of the private cryptocurrency wallet Samourai Wallet.
Customers lost Bitcoin holdings of $150 million at the time of Cred's bankruptcy filing on November 7, 2020. Since then, the market value of these assets has increased to a possible maximum of nearly $783 million.
May 2024, Cryptoniteuae