Cred Crypto Execs Face Years for Wire Fraud

SAN FRANCISCO – The house of cards finally collapsed for the leadership of Cred LLC. Former CEO Daniel Schatt, 55, of San Mateo, and CFO Joseph Podulka, 53, of Palo Alto, received hefty federal prison sentences today after pleading guilty to conspiracy to commit wire fraud. Schatt will spend 52 months behind bars, while Podulka will serve 36 months, handed down by Senior U.S. District Judge William Alsup.

The pair were indicted by a federal grand jury in May 2024, but the rot at Cred, a San Francisco-based firm offering crypto lending services, had been festering for far longer. The scheme, as detailed in court documents, involved deliberately misleading customers about the firm’s precarious financial health. Schatt and Podulka painted a rosy picture while concealing critical risks and mounting losses, all to keep the failing business afloat.

“The defendants’ criminal conspiracy caused significant harm to Cred’s customers,” stated U.S. Attorney Craig H. Missakian. “This prosecution should serve as a reminder that my Office will aggressively prosecute fraud schemes undermining the integrity of cryptocurrency markets. Fraud targeting cryptocurrency investors and customers will not be tolerated and wrongdoers will be held accountable for their actions.” The feds aren’t messing around; this case signals a crackdown on the Wild West of crypto finance.

The scam revolved around two core offerings: crypto-collateralized loans and promises of high-yield returns on deposited cryptocurrency. But the entire operation was built on a shaky foundation – a reliance on a Chinese company founded by a Cred co-founder to generate those promised yields. Cred was essentially loaning customer funds to this Chinese entity, which then made risky, high-interest loans to Chinese gamers. Simultaneously, Cred depended on a third-party hedging strategy to shield investors from crypto market volatility, a crucial detail conveniently omitted from customer disclosures.

The house of cards began to wobble in March 2020, with the COVID-19 pandemic and a brutal Bitcoin price crash. Cred’s hedging partner pulled the plug, leaving the company exposed. Simultaneously, the Chinese partner signaled it couldn’t repay tens of millions of dollars. Instead of coming clean, Schatt and Podulka doubled down on the deception, concealing the escalating crisis from investors. They prioritized propping up the failing venture over honest dealings.

“Daniel Schatt and Joseph Podulka orchestrated a scheme in which they deceived both investors and customers out of their hard-earned funds in an attempt to extend a failing business,” said Acting FBI Special Agent in Charge Matt Cobo. IRS Criminal Investigation’s Linda Nguyen added, “Our partnership with the U.S. Attorney’s Office and FBI has never been stronger as we will continue to relentlessly pursue these types of crimes based on greed and egoism.” The message is clear: no matter how complex the financial instrument, fraud will be hunted down and punished. The victims of Cred’s deceit deserve justice, and these sentences represent a step in that direction.

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