Efe Nail Saltık 
Three former executives of the now-defunct crypto lender Cred have been indicted on charges of conspiracy to commit wire fraud, wire fraud, and engaging in financial transactions for illicit purposes. Daniel Schatt, Joseph Podulka, and James Alexander, former key figures at Cred, were indicted by the U.S. Attorney’s Office in the Northern District of California. Schatt and Podulka were arrested and appeared in court in San Francisco on the same day.
Cred filed for bankruptcy in November 2020, citing irregularities in handling specific corporate funds. The company estimated its liabilities to be between $100 million and $500 million, with assets of less than $100 million. A reorganization plan was later approved by a federal judge.
Similar to other failed crypto lending companies like Celsius and Voyager, Cred offered a lending program called “CredEarn” that promised investors market-leading interest rates. However, the company filed for bankruptcy without sufficient funds to repay its creditors. Depositors had entrusted over $100 million worth of crypto assets to Cred by the time of its collapse.
The indictment alleges that the defendants misled customers by promising significant returns on cryptocurrency without disclosing that the funds investments to pay those returns were generated by a single company making unsecured micro-loans to Chinese gamers. Cred engaged in lending that was neither collateralized nor guaranteed, and its hedging strategy did not protect against volatility, according to the U.S. Department of Justice.
Attorneys representing the Cred Liquidation Trust expressed gratitude for the efforts of the DOJ and FBI, which led to the indictments of the key executives responsible for the first major crypto bankruptcy case in the United States.
The bankruptcy filing blamed an outside investment manager, Quantcoin, for Cred’s collapse, but later revealed that most of the lost customer funds had been loaned to the Chinese micro-lender MoKredit, which failed to repay its debts. Cred allegedly funneled users into its CredEarn program through the crypto exchange Uphold, misleading customers about the program’s safety and security.
Uphold denied the claims and stated that Schatt was removed from its board involuntarily. While a lawsuit from Cred’s Liquidation Trust against Uphold was dismissed, a class action suit from Cred’s creditors against Uphold is still pending.
You can also freely share your thoughts and comments about the topic in the comment section. Additionally, don’t forget to follow us on our Telegram, YouTube, and Twitter channels for the latest news and updates.