Former Cred Executives Sentenced to Federal Prison for $150 Million Crypto Fraud
In a significant legal development for the cryptocurrency industry, a federal judge sentenced two former executives of the failed crypto lender Cred to prison for orchestrating a massive fraud that resulted in the loss of over $140 million for investors. As of 2025, this case highlights the increasing scrutiny and accountability being placed on individuals in the rapidly evolving world of digital finance.
On October 28, 2025, Daniel Schatt, the former CEO and co-founder of Cred LLC, received a sentence of 52 months in federal prison. His counterpart, Chief Financial Officer Joseph Podulka, was sentenced to 36 months. These sentences were handed down by Senior U.S. District Judge William Alsup, following the executives’ guilty pleas to charges of wire fraud conspiracy earlier in May.
According to court documents, Schatt and Podulka misled customers regarding Cred’s financial stability while diverting approximately 80% of customer assets into high-risk microloans aimed at Chinese gamers through an affiliated entity. The fraudulent activities came to light during the 2020 crypto market crash, leading to devastating financial losses for more than 440,000 customers, whose combined losses amounted to $140 million, a figure that has escalated to over $1 billion at current cryptocurrency valuations.
“The sentences establish new precedents for executive accountability in crypto fraud cases,” commented Ishita Sharma, a blockchain and crypto lawyer and managing partner at Fathom Legal.
Sharma noted that federal sentencing patterns in these cases indicate a nuanced approach, balancing individual circumstances with the need to deter future misconduct within the industry. While Schatt’s 52-month sentence is considerably shorter than the 25 years received by Sam Bankman-Fried, it is still a stark reminder of the potential consequences of corporate malfeasance.
During a public session on March 18, 2020, Schatt assured customers that Cred was “operating normally,” even as the company faced a liquidity crisis. Further complicating the situation, the firm incurred an additional $9 million in losses due to a crypto scam, compounded by an incident involving former Chief Capital Officer James Alexander, who allegedly misappropriated about 255 BTC prior to his termination.
Sharma emphasized that this case reflects broader enforcement trends where courts are becoming increasingly aware of the reputational damage inflicted on the cryptocurrency sector as a whole. She stated, “Judges now weigh whether sentences properly deter similar misconduct while maintaining proportionality to the specific harm caused.” This is particularly relevant for crypto platforms navigating a landscape marked by regulatory uncertainty.
As part of their sentences, both Schatt and Podulka were also ordered to pay fines of $25,000 each and will be subject to three years of supervised release following their prison terms. A restitution hearing is scheduled for October 7, 2025, where further financial repercussions may be determined.
The Cred case serves as a crucial lesson for the cryptocurrency industry, underscoring the importance of transparency and ethical governance. As companies operate in a rapidly changing regulatory environment, experts recommend a proactive approach to disclosure, advocating for a “regulation-by-analogy” strategy that draws from established laws governing securities, banking, and commodities.
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