Court Sentences Cred Executives for Cryptocurrency Fraud
Date: 2025-09-01 Author: Henry Casey Categories: BUSINESS
A US federal court found two executives of the crypto lender Cred guilty - 55-year-old James Shutt from San Mateo and 53-year-old Daniel Podulka from Palo Alto. Both are scheduled to begin serving their sentences on October 28. In addition to the prison term, Judge William Alsup sentenced them to three years of probation and a fine of $25,000. A separate hearing on compensation for affected investors will be held on October 7.
Back in May 2025, the defendants pleaded guilty to deceiving Cred clients. According to the case materials, the management misled investors by promising guaranteed income and hiding key risks. In fact, the company's business model turned out to be unstable and depended on third-party partners.
Cred started out by offering cryptocurrency-backed loans in US dollars and interest-bearing deposit programs. However, a significant portion of the company's operations were linked to a Chinese firm set up by one of its co-founders. Cred would send client funds there, and the Chinese company would issue high-interest microloans to its users. The profits from these loans were supposed to be returned to Cred and provide payments to clients.
The scheme began to crumble in 2020, when the COVID-19 pandemic and the fall in the Bitcoin exchange rate seriously complicated the situation. The Chinese partner company found itself on the verge of bankruptcy, and then refused to pay tens of millions of dollars. Cred executives knew about what was happening, but did not inform investors, continuing to assure them that the business was stable.
In November 2020, Cred declared bankruptcy, which triggered an avalanche of lawsuits from clients. More than 6,000 victims have demanded compensation for damages in excess of $1 billion. The US Department of Justice emphasized that the executives deliberately concealed the real state of affairs and thereby caused serious financial damage.
"Shatt and Podulka built a scheme that resulted in thousands of investors losing their funds. Their actions caused colossal damage to the clients who trusted them," said FBI spokesman Matt Cobo.
The Cred case has become one of the most high-profile examples of fraud in the crypto lending industry. Against this background, law enforcement agencies are increasingly paying attention to companies working with digital assets in the United States. In recent months alone, courts have handed down several sentences: for example, one American was sentenced to 32 months in prison and a fine of $1.1 million for fraud with mining equipment, and another was sentenced to 10 years in prison for the theft of cryptocurrency.
The Cred story demonstrates how vulnerable investors are in the face of opaque schemes and the lack of proper control in the crypto market.
