Former Cred execs face embezzlement and money laundering charges.
Three former executives of bankrupt cryptocurrency lender Cred were indicted on charges of wire fraud and money laundering before the firm declared bankruptcy in November 2020.
“This prosecution demonstrates our commitment to keeping our markets free from fraudsters and safe for investors,” the U.S. Attorney's Office for the Northern District of California said in a May 3 statement.
Former CEO Daniel Schatt and CFO Joseph Podulka face 13 counts of wire fraud and money laundering, while CCO James Alexander faces four counts.
Acting Special Agent in Charge of IRS Criminal Investigations Mark Mosley said: “This demonstrates a predatory and deceptive practice that defrauds potential victims of hundreds of millions of dollars in cryptocurrency at market value.
When Cred announced its bankruptcy in November 2020, Cointelegraph reported that many users took to social media to express their concerns and ask “is their money safe?”
Prosecutors allege that the three executives were misleading customers through credit lending and investment practices.
Cred says it only engages in “guaranteed or guaranteed loans,” Cred's cryptocurrency investments are “hedged,” and Cred maintains an “all-weather approach” to investments to hedge against volatility.
However, prosecutors said Creed was “not guaranteed” that he was involved in making the loan.
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Sheth and Podulka made their first court appearance on May 2 and are due back on May 8 to enter a plea. Alexander's first court date has not yet been set.
As the crypto lender's former CEO Alex Mashinsky prepares to be sentenced in September 2024, he faces seven criminal charges following the company's July 2022 collapse.
Meanwhile, Genesis, another crypto lender that filed for bankruptcy in January 2023, is working to settle its debts with creditors. On April 2, Genesis liquidated about 36 million GBTC shares, generating $2.1 billion in Bitcoin.
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