Ex-Executives of Defunct Cred Face Fraud Charges Amid Rising Crypto-Lending Scrutiny
Summary:
Three high-ranking ex-executives of now-defunct cryptocurrency lender Cred, including the former CEO, CFO, and CCO, have been indicted for allegations of wire fraud and money laundering by the United States Attorney’s Office for the Northern District of California. The charges come in the wake of the firm's bankruptcy in November 2020. The executives allegedly deceived customers about Cred’s investment and lending practices, claiming their operations were risk-averse when they were not. The case underscores the growing legal scrutiny within the crypto-lending industry.
The United States Attorney’s Office for the Northern District of California has initiated charges against three previous top executives of the defunct cryptocurrency lending organization, Cred. The charges revolve around their suspected participation in activities of wire fraud as well as money laundering before the firm filed for bankruptcy in November 2020. "Our commitment to making our markets a no-go zone for fraudsters and a secure place for investors is resolutely shown by this prosecution," stated the Northern District of California's United States Attorney’s Office in a May 3 release.
Daniel Schatt, who had held the position of CEO, and Joseph Podulka, formerly the CFO, are now faced with 13 counts of money laundering and wire fraud. In contrast, James Alexander, the previous CCO, is facing four similar charges. IRS Criminal Investigation’s Acting Special Agent in Charge, Mark Mosley, stated that this case underscores an exploitative and fraudulent scheme potentially duping victims out of hundreds of millions in cryptocurrency based on market value. The trio will face the maximum penalty for each charge if proven guilty.
As per the report by Cointelegraph, when Cred filed for bankruptcy in November 2020, many members voiced worries on social media, questioning the security of their investments. Allegedly, the trio of executives misrepresented Cred’s investment and lending practices, claiming that the company partook solely in "collateralized or guaranteed lending". Additionally, they asserted that Cred's cryptocurrency investments were "hedged" and they held an "all-weather approach" to investments to shield against volatility. Prosecutors have countered these claims, arguing that Cred participated in lending which was neither “collateralized nor guaranteed".
On May 2nd, Schatt and Podulka had their premiere court appearance and are slated to enter their plea on May 8th. As for Alexander, a date of initial court appearance hasn't been decided yet. These charges were announced even as Alex Mashinsky, the former CEO of another crypto lender, braces himself for a sentencing hearing in 2024, where he faces seven felony charges following his company's eventual crash in July 2022.
In another development, Genesis, a different crypto-lending firm that declared bankruptcy in January 2023, is maneuvering to settle its liabilities with its lenders. In order to accomplish this, Genesis liquidated roughly 36 million GBTC shares on April 2nd—an action that generated $2.1 billion in Bitcoin.
Published At
5/4/2024 3:52:32 AM
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