Three former top executives at the now-bankrupt cryptocurrency lending platform Cred are facing serious criminal charges related to an alleged fraud scheme. After making their initial court appearances on May 2nd, former Cred CEO Daniel Schatt and CFO Joseph Podulka must return to court on May 8th to enter their pleas.

Schatt and Podulka have been charged with 13 counts each of wire fraud and money laundering. The company's former Chief Compliance Officer James Alexander faces four counts. Prosecutors accuse the three executives of misleading customers about Cred's lending practices and investment strategies prior to the firm declaring bankruptcy in November 2020.

According to the U.S. Attorney's Office for the Northern District of California, which is prosecuting the case, the executives falsely claimed that Cred only engaged in "collateralized or guaranteed lending" when in reality many of their crypto loans were uncollateralized. They also allegedly lied about hedging investments against volatility and maintaining an "all weather approach" to protect customers.

"This prosecution demonstrates our determination to keep our markets free of fraudsters and safe for investors," the U.S. Attorney's statement read. IRS Criminal Investigation Acting Special Agent Mark Mosley added that it "highlights a predatory, deceptive scheme defrauding potential victims of hundreds of millions of dollars of cryptocurrency at market value."

If convicted on all charges, Schatt and Podulka could face maximum sentences of decades in prison, while Alexander faces a shorter but still substantial maximum. The charges underscore increased efforts by authorities to crack down on fraud and illicit activities in the cryptocurrency industry.

The Cred case follows on the heels of similar charges against Alex Mashinsky, the former CEO of failed crypto lender Celsius Network. Mashinsky was charged in early 2023 with multiple felonies and faces sentencing in September 2024 related to Celsius' implosion.

As crypto lending platforms like Cred, Celsius, and Genesis have collapsed over the past couple of years amid broader industry turmoil, federal investigators are taking a hard look at whether executives at these firms misled customers and mishandled customer funds. The Cred prosecution appears to be one of the first major cases charging specific individuals for alleged wrongdoing.