Former Cred LLC executives Daniel Schatt and Joseph Podulka were sentenced today to 52 months and 36 months in federal prison, respectively, for conspiracy to commit wire fraud.
Senior U.S. District Judge William Alsup handed down the sentences.
Schatt, 55, of San Mateo, and Podulka, 53, of Palo Alto, were indicted by a federal grand jury in May 2024.
Defendants each pleaded guilty on May 13, 2025, to one count of wire fraud conspiracy in connection with their roles in defrauding customers of Cred. This San Francisco-based firm provided financial services to holders of cryptocurrency and other assets. Schatt, who co-founded Cred, served as the CEO, and Podulka served as the company’s CFO.
According to the plea agreements, Schatt and Podulka conspired to present an incomplete, unreasonably positive, and thus misleading portrayal of Cred’s business while failing to disclose negative material information about Cred’s business challenges and risks to Cred’s customers.
“The defendants’ criminal conspiracy caused significant harm to Cred’s customers,” said United States Attorney Craig H. Missakian. “This prosecution should serve as a reminder that my Office will aggressively prosecute fraud schemes undermining the integrity of cryptocurrency markets. Fraud targeting cryptocurrency investors and customers will not be tolerated, and wrongdoers will be held accountable for their actions.”
“Daniel Schatt and Joseph Podulka orchestrated a scheme in which they deceived both investors and customers out of their hard-earned funds in an attempt to extend a failing business. The FBI is committed to investigating investment fraud schemes targeting cryptocurrency holders and working with our partners to bring fraudsters to justice,” said acting FBI special agent in Charge Matt Cobo.
Cryptocurrency may still seem foreign to some people, but investment fraud schemes are nothing new, according to IRS Criminal Investigation (IRS-CI) Oakland Field Office special agent in charge Linda Nguyen.
“IRS-CI special agents are the best financial investigators in the world and will not stand by and allow companies to defraud their customers through malicious actions,” said Nguyen. “Our partnership with the U.S. Attorney’s Office and FBI has never been stronger as we will continue to relentlessly pursue these types of crimes based on greed and egoism.”
By late 2018, Cred’s business included two principal customer offerings: offering loans in U.S. dollars to customers using their cryptocurrency as collateral and accepting deposits of cryptocurrency in exchange for a promise of yield (interest payments) on that cryptocurrency.
Cred’s business depended on a relationship with a Chinese company founded by one of Cred’s co-founders to generate the interest yield for Cred’s customers, a fact that many Cred customers did not know.
Under this arrangement, Cred would lend the Chinese company a percentage of Cred’s customers’ funds, and the Chinese company would make short-term, high-interest microloans to Chinese gamers, generating interest to repay Cred.
Cred’s business also relied on a hedging strategy, utilising a third-party company to protect Cred from overexposure to cryptocurrency market fluctuations, given Cred’s promises to its customers about specific yields they would earn while keeping their assets secure.
According to the plea agreements, the Defendants’ conspiracy began in March 2020, following the onset of the COVID-19 pandemic and a sudden and dramatic decrease in the price of Bitcoin. Within days of the crash, Cred learned from its hedging partner that Cred was underwater and needed to liquidate all its trading positions.
The hedging partner then ended its relationship with Cred, leaving Cred with no hedges and no hedging strategy going forward. As the conspiracy progressed, the defendants also learned that the Chinese company would be unable to repay tens of millions of dollars to Cred.
Rather than convey Cred’s worsening financial situation to its customers, the defendants each made misleading representations to customers or investors about Cred’s financial situation, including a public Ask Management Anything session that Schatt conducted on March 18, 2020, during which he stated that Cred’s business was “operating normally.”
On November 7, 2020, Cred filed for bankruptcy.
Cred customers and investors filed more than 6,000 claims totalling more than $140 million in the Cred bankruptcy proceedings. According to the government’s sentencing memorandum, those claims are worth over $1 billion using August 2025 valuations for the different cryptocurrencies that customers lost.
In addition to the prison term, Judge Alsup also sentenced Schatt and Podulka each to three years of supervised release and ordered them to pay a $25,000 fine. The defendants will begin serving their sentences on October 28, 2025. Judge Alsup set a restitution hearing for October 7, 2025.
