Cred LLC Execs Face Federal Sentencing in Landmark Crypto Fraud Case
Crypto's wild west era just got another sheriff.
Federal Hammer Drops
Cred LLC leaders learned the hard way that blockchain transactions are permanent—including the ones that land you in court. U.S. district judges handed down sentences this week, wrapping up a multi-year fraud investigation that saw millions vanish from investor accounts.
Play Stupid Games, Win Prison Uniforms
The founders promised algorithmic trading returns too good to be true. Spoiler: they were. Instead of generating profits, funds got funneled into high-risk strategies and personal luxuries—classic move for folks who think 'decentralized' means 'unaccountable'.
Regulators Aren't Just Watching Cat Videos
While crypto Twitter debates moon math, federal prosecutors have been building cases with blockchain forensic tools that would make Satoshi nervous. This sentencing sends a clear signal: fraud statutes apply even when your bank is a MetaMask wallet.
Another cautionary tale in an industry where 'trustless' systems still require someone not to be a crook. Maybe next time try actually delivering those returns instead of just pitching them on a podcast.
The Conspiracy and Impact
Cred allowed customers to deposit cryptocurrency to earn interest and also offered loans using crypto as collateral. However, the business model relied heavily on two risky arrangements.
Prosecutors explained that Cred secretly relied on a Chinese company, linked to one of its co-founders, to generate interest. This company used customer funds to make short-term, high-interest loans to gamers in China. At the same time, Cred used a third-party hedging firm to protect against crypto market fluctuations.
When the COVID-19 pandemic hit in March 2020 and Bitcoin prices dropped, both arrangements failed. The hedging partner forced Cred to liquidate its positions, and the Chinese company said it could not repay tens of millions of dollars. Cred’s finances collapsed, but instead of warning customers, Schatt and Podulka assured the public the company was “operating normally.”
In November 2020, Cred filed for bankruptcy. More than 6,000 customers and investors
filed claims of around $140 million in losses, which prosecutors said WOULD now be worth over $1 billion given current crypto prices. Authorities said the executives misled investors and customers in an attempt to cover up the company’s failure.
Along with prison sentences, Schatt and Podulka each received three years of supervised release and were fined $25,000. A separate hearing in October 2025 will determine how much restitution they must repay.
The defendants will start their prison sentences on October 28, 2025, and a restitution hearing is scheduled for October 7, 2025.
Also Read: Unicoin Counters SEC Fraud Lawsuit, Seeks Dismissal in NY Court
