The downfall of crypto lending platform Cred Inc. reached a new chapter Tuesday as two of its former executives pleaded guilty to wire fraud conspiracy in a San Francisco federal courtroom, admitting they misled customers in the lead-up to the firm’s high-profile collapse in 2020.
Daniel Schatt, co-founder and former CEO of Cred, along with Joseph Podulka, the firm’s ex-Chief Financial Officer, acknowledged that they deliberately misrepresented the company’s financial condition and concealed risks associated with its lending operations. According to U.S. District Judge William Alsup, the two executives worked to paint an overly optimistic picture of the company while withholding material negative information from customers.
Their misleading conduct led to massive customer losses, with over 6,000 claims totaling more than $140 million filed during Cred’s bankruptcy proceedings. The company officially filed for Chapter 11 protection in October 2020 after failing to recover from poor lending decisions and internal mismanagement.
The case adds to a growing number of criminal prosecutions targeting crypto executives accused of betraying investor trust through fraud and misrepresentation. Sentencing for both Schatt and Podulka is expected in the coming months.
Market Crash and Loans Sparked Cred’s Collapse
Cred Inc.’s unraveling can be traced back to the March 2020 market crash, when Bitcoin’s sudden 40% plunge in a single day triggered a liquidity crisis across the crypto lending sector. The flash crash—set off at the onset of the COVID-19 pandemic—wiped out over $750 million in market value and left Cred unable to meet its margin obligations.
In court, former CEO Daniel Schatt admitted that the crash created severe financial stress for the company. “Bitcoin took a precipitous fall, creating a risk for Cred,” Schatt told U.S. District Judge William Alsup, acknowledging the firm’s inability to cover margin calls.
Rather than scale back, Cred executives reportedly doubled down—seeking fresh customer deposits and attempting to delay withdrawals in a bid to stabilize their deteriorating position.
But the real blow came from Cred’s largest borrower, MoKredit—a China-based microloan platform founded by Cred’s own co-founder, Lu Hua. The Department of Justice noted that MoKredit specialized in unsecured loans to Chinese gamers and eventually defaulted on $40 million owed to Cred.
At the time of its collapse, Cred had allocated roughly 80% of customer funds to MoKredit, tying the platform’s fate to a single high-risk borrower. This exposure—paired with market volatility and opaque internal decision-making—ultimately pushed Cred into bankruptcy and triggered criminal investigations into its leadership.
Further Charges and Sentencing
Alexander was later charged in a separate federal indictment unsealed in 2023, as authorities unraveled a broader pattern of mismanagement and deception at the failed crypto lender.
Adding to the chaos, former CEO Daniel Schatt admitted that Cred was also duped by what he described in court as a fraudulent investment scheme. The deception resulted in the loss of 800 BTC—valued at over $9 million at the time—further crippling the platform’s ability to recover.
Federal prosecutors have recommended prison sentences of up to six years for Schatt and just over five years for former CFO Joseph Podulka. Sentencing is scheduled for August 26, as the case continues to highlight the systemic failures that contributed to one of the most notorious collapses in crypto lending history.
Quick Facts
- Former Cred CEO and CFO pleaded guilty to wire fraud.
- Over $140 million in customer losses linked to their conduct.
- Collapse tied to MoKredit loan default and BTC investment scam.
- Sentencing for both executives is scheduled for August 26.
