SAN FRANCISCO – Former Cred LLC executives Daniel Schatt and Joseph Podulka have been sentenced right this moment to 52 months and 36 months in federal jail, respectively, for wire fraud conspiracy. Senior U.S. District Choose William Alsup handed down the sentences.
Schatt, 55, of San Mateo, and Podulka, 53, of Palo Alto, have been indicted by a federal grand jury in Might 2024. Defendants every pleaded responsible on Might 13, 2025, to at least one rely of wire fraud conspiracy in reference to their roles in defrauding prospects of Cred, a San Francisco-based agency that offered monetary companies to holders of cryptocurrency and different belongings. Schatt, who co-founded Cred, served because the CEO and Podulka served as the corporate’s CFO. In response to the plea agreements, Schatt and Podulka conspired to current an incomplete, unreasonably constructive, and thus deceptive portrayal of Cred’s enterprise whereas failing to reveal unfavorable materials details about Cred’s enterprise challenges and dangers to Cred’s prospects.
“The defendants’ legal conspiracy precipitated vital hurt to Cred’s prospects,” stated United States Legal professional Craig H. Missakian. “This prosecution ought to function a reminder that my Workplace will aggressively prosecute fraud schemes undermining the integrity of cryptocurrency markets. Fraud concentrating on cryptocurrency traders and prospects is not going to be tolerated and wrongdoers will probably be held accountable for his or her actions.”
“Daniel Schatt and Joseph Podulka orchestrated a scheme by which they deceived each traders and prospects out of their hard-earned funds in an try to increase a failing enterprise. The FBI is dedicated to investigating funding fraud schemes concentrating on cryptocurrency holders and dealing with our companions to deliver fraudsters to justice,” stated Performing FBI Particular Agent in Cost Matt Cobo.
“Cryptocurrency should still appear overseas to some individuals, however funding fraud schemes are nothing new,” stated IRS Legal Investigation (IRS-CI) Oakland Subject Workplace Particular Agent in Cost Linda Nguyen. “IRS-CI particular brokers are the perfect monetary investigators on the earth and won’t stand by and permit corporations to defraud their prospects via malicious actions. Our partnership with the U.S. Legal professional’s Workplace and FBI has by no means been stronger as we’ll proceed to relentlessly pursue these sorts of crimes primarily based on greed and egoism.”
By late 2018, Cred’s enterprise included two principal buyer choices: providing loans in U.S. {dollars} to prospects utilizing prospects’ cryptocurrency as collateral and accepting deposits of cryptocurrency in change for a promise for a yield (curiosity funds) for that cryptocurrency. Cred’s enterprise trusted a relationship with a Chinese language firm based by one of Cred’s co-founders to generate the curiosity yield for Cred’s prospects, a proven fact that many Cred prospects didn’t know. Below this association, Cred would mortgage the Chinese language firm a share of Cred’s prospects’ funds, and the Chinse firm would make short-term, high-interest microloans to Chinese language avid gamers to generate curiosity to pay again to Cred. Cred’s enterprise additionally trusted a hedging technique utilizing a third-party firm to guard Cred from overexposure to cryptocurrency market fluctuations given Cred’s guarantees to its prospects about particular yields they might earn whereas protecting their belongings protected.
In response to the plea agreements, Defendants’ conspiracy started in March 2020 following the onset of the COVID pandemic and a sudden and dramatic lower within the worth of Bitcoin. Inside days of the crash, Cred discovered from its hedging accomplice that Cred was underwater and wanted to liquidate all its buying and selling positions. The hedging accomplice then ended its relationship with Cred, leaving Cred with no hedges and no hedging technique going ahead. Because the conspiracy progressed, Defendants additionally discovered that the Chinese language firm wouldn’t be capable to pay again tens of tens of millions of {dollars} to Cred.
Quite than convey Cred’s worsening monetary scenario to its prospects, the defendants every made deceptive representations to prospects or traders about Cred’s monetary scenario, together with a public Ask Administration Something session that Schatt carried out on March 18, 2020, throughout which he acknowledged that Cred’s enterprise was “working usually.”
On Nov. 7, 2020, Cred filed for chapter. Cred prospects and traders filed greater than 6,000 claims totaling greater than $140 million within the Cred chapter proceedings. In response to the federal government’s sentencing memorandum, these claims are price over $1 billion utilizing August 2025 valuations for the completely different cryptocurrencies that prospects misplaced.
In addition to the jail time period, Choose Alsup additionally sentenced Schatt and Podulka every to a three-year interval of supervised launch and ordered fee of a $25,000 fantastic. The defendants will start serving their sentences on Oct. 28, 2025. Choose Alsup set a restitution listening to for Oct. 7, 2025.
Assistant U.S. Attorneys Barbara Valliere, Patrick O’Brien, Richard Ewenstein, and Adam Reeves prosecuted the case with the help of Helen Yee and Maryam Beros. The prosecution is the outcome of an investigation by the FBI and IRS-CI.
