Three former executives of the now-defunct cryptocurrency lending platform Cred are facing charges of wire fraud and money laundering related to their alleged activities leading up to the company's bankruptcy filing in November 2020. The United States Attorney's Office for the Northern District of California emphasized their commitment to safeguarding markets from fraudulent activities and ensuring investor protection in a statement released on May 3.

Former CEO Daniel Schatt and CFO Joseph Podulka are each facing a total of 13 charges, encompassing allegations of wire fraud and money laundering, while former Chief Compliance Officer (CCO) James Alexander is charged with four counts. Mark Mosley, the Acting Special Agent in Charge of IRS Criminal Investigation, described the scheme as predatory and deceptive, purportedly defrauding victims of hundreds of millions of dollars worth of cryptocurrency at market value.

The charges stem from accusations that the executives misled customers regarding Cred's lending and investment practices. Prosecutors assert that Cred falsely represented its lending as collateralized or guaranteed, claimed its cryptocurrency investments were hedged, and touted an "all weather approach" to investment to mitigate volatility. However, the government alleges that Cred engaged in lending that lacked proper collateralization or guarantees.

Following Cred's bankruptcy filing, concerned users took to social media platforms to inquire about the safety of their funds. Schatt and Podulka made their initial court appearance on May 2, with a plea entry scheduled for May 8, while Alexander's court date is pending.

These charges come amid ongoing legal proceedings in the cryptocurrency lending sector. Alex Mashinsky, former CEO of another collapsed crypto lender, is awaiting sentencing in September 2024 after being charged with seven felonies following his company's demise in July 2022. In parallel, Genesis, a crypto lending firm that filed for bankruptcy in January 2023, is actively working to settle its debts with creditors, recently liquidating approximately 36 million GBTC shares for $2.1 billion in Bitcoin on April 2.