Two former executives from defunct crypto lender Cred LLC have been sentenced to a combined 88 months in federal prison for their roles in a wire fraud conspiracy.

The conspiracy left over 6,000 customers with more than $140 million in losses.

Senior U.S. District Judge William Alsup sentenced co-founder and former CEO Daniel Schatt to 52 months behind bars. Former CFO Joseph Podulka received a 36-month term.

Cred executives pleaded guilty in May

Both defendants pleaded guilty in May to wire fraud conspiracy charges stemming from their deceptive business practices at the San Francisco-based cryptocurrency lending platform.

The sentences cap a lengthy legal battle that began with Cred’s November 2020 bankruptcy filing.

Using current cryptocurrency valuations from August, the government estimates customer losses exceed $1 billion. This makes this one of the costliest crypto lending failures to date.

Cred operated as a cryptocurrency financial services provider and offered dollar loans against crypto collateral and accepted customer deposits in exchange for promised yield payments.

The company’s business model relied heavily on partnerships with overseas entities that prosecutors say customers were largely unaware of.

The fraud conspiracy took root in March 2020 when COVID-19 market turmoil triggered a Bitcoin price crash.

This event exposed fatal flaws in Cred’s risk management strategy and set the stage for the executives’ subsequent deceptive conduct.

COVID Crash Exposed Cred’s Risky Business Model

The March 2020 crypto market crash badly affected Cred’s operations. Within days of Bitcoin’s ( Go to Source to See Full Article
Author: Vignesh Karunanidhi