The former CEO and CFO of Cred are required to submit a plea by May 8 following their initial court hearings on May 2.

Before the company filed for bankruptcy in November 2020, three former executives of the bankrupt cryptocurrency lender Cred are accused of wire fraud and money laundering.

"This prosecution demonstrates our determination to keep our markets safe for investors and free of fraudsters," the Northern District of California United States Attorney's Office stated in a statement on May 3.

James Alexander, the chief commercial officer, is charged with four counts of wire fraud, while former CEO Daniel Schatt and chief financial officer Joseph Podulka are facing thirteen charges each.

It draws attention to a predatory, dishonest plan that defrauds potential victims of hundreds of millions of dollars of cryptocurrency at market value,” said Mark Mosley, criminal investigation acting special agent in charge at the U.S. Internal Revenue Service.

When Cred declared bankruptcy in November 2020, Cointelegraph reported that numerous users turned to social media to voice their concerns and ask if “their funds are safe.”

Prosecutors allege that the three executives misled customers about Cred’s lending and investment practices.

Cred allegedly claimed to only engage in “collateralized or guaranteed lending,” that its cryptocurrency investments were “hedged,” and that it maintained an “all weather approach” to investment to protect against volatility.

However, the prosecutors claimed that Cred engaged in lending that “was neither collateralized nor guaranteed.”

Schatt and Podulka appeared in court for the first time on May 2 and must return to enter a plea on May 8. Alexander’s initial court date has not yet been set.

The charges come as the former CEO of crypto lender Alex Mashinsky prepares for his sentencing hearing in September 2024, where he faces seven felony charges following the firm’s collapse in July 2022.

Meanwhile, Genesis, another crypto lending firm that filed for bankruptcy in January 2023, is working to settle its debts with creditors. On April 2, Genesis liquidated around 36 million shares of its Grayscale Bitcoin Trust, generating $2.1 billion.