The case involving Cred LLC, a San Francisco-based cryptocurrency lending firm that filed for bankruptcy in November 2020, has been resolved with a sentencing that will see its founder and CFO spend time in jail.
The executives, Daniel Schatt (former CEO) and Joseph Podulka (former CFO), are being punished for their roles in a wire fraud conspiracy that led to about $1 billion customer losses according to current coin valuations.
How long will Cred’s CEO and CFO be gone for?
According to the U.S. Attorney’s office for the Northern District of California, Daniel Schatt, the company’s co-founder and CEO, got off with the heavier sentence of 52 months while Joseph Podulka, the company’s CFO, received a 36-month sentence.
Along with the prison time, Schatt and Podulka also received three years of supervised release and a fine of $25,000.
The 55-year-old Schatt and Podulka, 53, both pleaded guilty in May to wire fraud conspiracy and were indicted along with former chief capital officer James Alexander last year.
U.S. Attorney Craig Missakian in a statement from Friday said the criminal conspiracy dealt significant damage to Cred’s customers.
Cred’s business offered loans to customers primarily by using crypto as collateral and accepting deposits of cryptocurrency in exchange for interest. That was the part the customers knew.
The part many of them did not know was that the business also depended on a relationship with a Chinese firm founded by one of Cred’s co-founders to generate the interest yield.
“Under this arrangement, Cred would loan the Chinese company a percentage of Cred’s customers’ funds, and the Chinese company would make short-term, high-interest microloans to Chinese gamers to generate interest to pay back to Cred,” the U.S. Attorney’s office said.
The business was also dependent on a hedging strategy and used a third-party company to protect Cred from overexposure to fluctuations in the crypto market.
The plea agreement traces the conspiracy back to March 2020, just as the COVID-19 pandemic began, and the price of Bitcoin subsequently tanked.
Cred heard from its hedging partner that it was underwater and would need to liquidate all of its trading positions, prosecutors said. The Chinese company also informed Cred that it would be unable to pay back tens of millions of dollars, which the executives hid from customers and investors.
According to prosecutors, Schatt reassured everyone during a public “Ask Management Anything” session on March 18, 2020 that Cred was “operating normally.”
“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 FBI Special Agent in Charge Matt Cobo.
Following the company’s bankruptcy filing, customers and investors filed over 6,000 claims totaling more than $140 million, now worth more than $1 billion, based on August 2025 valuations.
A restitution hearing has been scheduled for October 7, and the pair is expected to start serving their sentences on October 28.
Regulators will still go after fraud and mismanagement
Schatt and Podulka are not the only crypto founders who have faced legal consequences this year.
The SEC is no longer on the offensive and has even dismissed several high-profile cases involving some giants in the industry. But the U.S. Attorney Craig Missakian has promised that “fraud targeting cryptocurrency investors and customers will not be tolerated and wrongdoers will be held accountable for their actions.”
Aside from Schatt and Podulka, other notable crypto executives facing legal prosecution include Alex Mashinsky, the founder and former CEO of bankrupt crypto lending platform Celsius, who was sentenced to 12 years in prison for fraud on May 8.
There is also Wolf Capital’s co-founder and head trader Travis Ford, who pleaded guilty on January 10 to wire fraud conspiracy charges. Do Kwon of Terraform Labs has also pleaded guilty to fraud charges, and the embattled Sam Bankman-Fried is serving a 25-year sentence.
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