The former Cred CEO and CFO are required to make a plea on May 8, after their first court hearings on May 2.
Cred, a cryptocurrency lender that went bankrupt in November 2020, saw three executives face charges related to wire fraud and money laundering.
The United States Attorney’s Office for the Northern District of California said on May 3 that “this prosecution underscores our dedication to maintaining our markets free of fraudsters and secure for investors.”
On thirteen counts of wire fraud and money laundering, along with four counts against chief commercial officer James Alexander, former chief executive officer Daniel Schatt and chief finance officer Joseph Podulka face accusations.
“It illustrates a predatory, misleading scheme that bilked prospective victims out of hundreds of millions of dollars’ worth of bitcoin at market value,” said Mark Mosley, the acting special agent in charge of criminal investigations at the American Internal Revenue Service.
Many Cred customers took to social media after the company’s bankruptcy announcement in November 2020 to express their fears and enquire as to whether “their funds are secure.”
According to the prosecution, the three executives lied to Cred’s clients about the company’s lending and investing policies.
Cred supposedly said that it limited itself to “collateralized or guaranteed lending,” that it “hedged” its bitcoin holdings, and that it used an “all-weather strategy” to invest to shield itself from market fluctuations.
Cred allegedly participated in loans that “were neither collateralized nor guaranteed,” according to the prosecution.
The first court appearance for Schatt and Podulka was on May 2, and they are required to return on May 8 to enter a plea. The first court date for Alexander is still pending.
A sentencing hearing for Alex Mashinsky, a former chief executive officer of a cryptocurrency lending business that went bankrupt in July 2022, will take place in September 2024. Mashinsky is facing seven felony counts related to the collapse of the company.
In the meantime, creditors are attempting to reach a settlement with Genesis, another cryptocurrency loan company that declared bankruptcy in January 2023. Genesis made $2.1 billion on April 2 from the sale of about 36 million shares in its Grayscale Bitcoin Trust.
Also Read: CFTC Commissioner is interested in establishing an AI Fraud Task Force
Wallets