On May 3, the US Department of Justice (DOJ) unveiled charges against former executives of Cred, a defunct crypto lending and investment company. Authorities accused Daniel Schatt, Joseph Podulka, and James Alexander of participating in a scheme that led to customers losing crypto holdings valued at over $783 million.

Mark Mosley, Acting Special Agent in Charge of IRS Criminal Investigation, described the defendants' actions at Cred as a "predatory, deceptive scheme."

Cred offered loans in US dollars to customers who used crypto as collateral and promised yield or interest to those who deposited their crypto. However, the former executives allegedly made false statements by March 2020, claiming that Cred engaged only in collateralized and guaranteed lending, utilized hedged crypto investments, and had protection against volatility.

Marketing materials allegedly misrepresented Cred as a licensed lender with comprehensive insurance, portraying the firm as solvent after a 2020 flash crash and promising insurance coverage to compensate customers. Despite admissions of potential insolvency by Cred's General Counsel, the executives purportedly solicited new customer funds without disclosing the firm's financial status.

Moreover, the executives allegedly concealed that customer yields relied heavily on a single company providing micro-loans to Chinese gamers.

A federal grand jury charged each executive with conspiracy, wire fraud, and money laundering, with potential sentences totaling decades in prison and millions in fines. Schatt and Podulka appeared in court on May 2 and will return on May 8 for a plea entry, while Alexander's initial court appearance is pending.

The case is unfolding in the Northern District of California, where BTC-e operator Alexander Vinnik also pleaded guilty on the same day.

The DOJ has announced two other cases recently: one against Bitcoin advocate Roger Ver for alleged tax evasion in the Central District of California and one against the founders of the privacy-centric crypto wallet Samourai Wallet in the Southern District of New York.