A federal judge has sentenced two former Cred executives for their roles in a high-profile crypto fraud that wiped out customer funds. Former CEO Daniel Schatt received 52 months in prison and ex-CFO Joseph Podulka was handed 36 months, after both pleaded guilty to wire fraud conspiracy in May.
Prosecutors say the executives misled customers about Cred’s financial health while secretly diverting roughly 80% of customer assets into high-risk microloans made to Chinese gamers through an affiliated company. When those loans and market turmoil collapsed during the 2020 crypto crash, more than 440,000 customers lost about $140 million — a figure that exceeds $1 billion at today’s prices. Cred also lost another $9 million to a crypto scam and, prosecutors allege, a former chief capital officer took roughly 255 BTC before his firing.
The sentences were issued by Senior U.S. District Judge William Alsup. Both men begin their terms on October 28, will serve three years of supervised release, and were each fined $25,000. A restitution hearing is scheduled for October 7.
Ishita Sharma, a blockchain and crypto lawyer, told reporters the case sets an important precedent: courts are increasingly weighing loss amount, role in the offense, and acceptance of responsibility when sentencing crypto executives. Sharma noted Schatt’s longer term — 16 months more than the CFO — reflects leadership and greater culpability.
Beyond the individual penalties, the Cred ruling signals broader enforcement trends. Judges now appear to factor in the reputational harm to the wider crypto sector and aim to balance deterrence with proportionality. For companies operating in regulatory gray areas, the practical lesson is clear: transparency and strong internal controls matter. Sharma recommends a “regulation-by-analogy” approach that borrows best practices from securities and banking to reduce legal exposure.
What to watch next: the October restitution hearing and whether regulators or private plaintiffs pursue additional claims. The Cred case may influence future sentencing and compliance expectations across the crypto industry.
Source: Decrypt. Read the original coverage for full details.