The recent resolution of the case involving Cred LLC, a San Francisco-based cryptocurrency lending firm that filed for bankruptcy in November 2020, has brought about significant consequences for its founder and CFO. Daniel Schatt, the former CEO, and Joseph Podulka, the former CFO, have been sentenced to jail time due to their involvement in a wire fraud conspiracy that resulted in approximately $1 billion in customer losses based on current coin valuations.
The U.S. Attorney’s office for the Northern District of California disclosed that Daniel Schatt received a 52-month sentence, while Joseph Podulka was sentenced to 36 months. Additionally, both individuals will serve three years of supervised release and pay a fine of $25,000. The 55-year-old Schatt and 53-year-old Podulka pleaded guilty to wire fraud conspiracy in May and were indicted alongside former chief capital officer James Alexander.
The criminal conspiracy orchestrated by Schatt and Podulka had a detrimental impact on Cred’s customers. The company, which offered loans to customers by utilizing cryptocurrency as collateral and accepting deposits in exchange for interest, also engaged in undisclosed practices. These practices included a partnership with a Chinese firm, founded by one of Cred’s co-founders, to generate interest yield by providing high-interest microloans to Chinese gamers.
Furthermore, Cred relied on a hedging strategy and a third-party company to mitigate risks associated with fluctuations in the crypto market. The conspiracy unraveled in March 2020 amid the onset of the COVID-19 pandemic and a subsequent decline in the price of Bitcoin. Cred faced financial challenges as its hedging partner demanded liquidation of trading positions, and the Chinese company failed to repay tens of millions of dollars.
Despite these issues, Schatt reassured customers and investors that Cred was operating normally during a public session. The FBI Special Agent in Charge, Matt Cobo, condemned Schatt and Podulka for deceiving investors and customers to prolong a failing business. Following the bankruptcy filing, over 6,000 claims totaling more than $140 million were submitted by customers and investors, now valued at over $1 billion as of August 2025.
A restitution hearing is scheduled for October 7, with Schatt and Podulka set to commence their sentences on October 28. The case serves as a reminder that regulators will continue to pursue cases of fraud and mismanagement within the cryptocurrency industry. U.S. Attorney Craig Missakian emphasized that wrongdoers targeting cryptocurrency investors will face consequences for their actions.
In addition to Schatt and Podulka, other prominent figures in the crypto sector have faced legal repercussions this year. Alex Mashinsky, the founder of Celsius, was sentenced to 12 years in prison for fraud, while Travis Ford of Wolf Capital pleaded guilty to wire fraud conspiracy charges. Do Kwon of Terraform Labs and Sam Bankman-Fried are also embroiled in legal battles for fraud-related offenses.
As the industry grapples with instances of fraud and misconduct, it is crucial for stakeholders to prioritize transparency, accountability, and ethical practices to foster trust and sustainability in the cryptocurrency market.