Cred executives Daniel Schatt and Joseph Podulka were sentenced to years behind bars for defrauding customers of the crypto lender, a new press release from the U.S. Attorney’s Office of the Northern District of California shows.
According to the press release, Schatt and Podulka were sentenced on Friday to 52 months and 36 months in federal prison, respectively, for a wire fraud conspiracy.
Schatt and Podulka pleaded guilty to wire fraud in May after being indicted on criminal charges alongside Cred Chief Capital Officer James Alexander early last year.
“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.
“The FBI is committed to investigating investment fraud schemes targeting cryptocurrency holders and working with our partners to bring fraudsters to justice,” he added.
U.S. officials allege the duo’s fraud scheme began at the start of the COVID pandemic in March 2020, when Cred’s hedging partner was forced to liquidate all its trading positions following “a sudden and dramatic decrease” in Bitcoin’s value.
“The hedging partner then ended its relationship with Cred, leaving Cred with no hedges and no hedging strategy going forward,” the press release reads. “As the conspiracy progressed, Defendants also learned that the Chinese company would not be able to pay back tens of millions of dollars to Cred.”
The crypto executives then made “misleading representations” about Cred’s financial situation, with Schatt claiming that the business was “operating normally” during an “Ask Management Anything” session.
Schatt and Podulka will begin serving their sentences on October 28 for the crypto-oriented fraud, while a restitution hearing has been set for October 7.
