Three former executives of bankrupt cryptocurrency lender Cred have been charged over allegedly engaging in wire fraud and money laundering prior to the firm declaring bankruptcy in November 2020.

“This prosecution demonstrates our determination to keep our markets free of fraudsters and safe for investors,” the United States Attorney’s Office for the Northern District of California wrote in a May 3 statement.

Former CEO Daniel Schatt and CFO Joseph Podulka face 13 charges of wire fraud and money laundering, while CCO James Alexander is charged with four counts.

“It highlights a predatory, deceptive scheme defrauding potential victims of hundreds of millions of dollars of cryptocurrency at market value,” said IRS Criminal Investigation Acting Special Agent in Charge Mark Mosley.

When Cred declared bankruptcy in November 2020, Cointelegraph reported that numerous users turned to social media to voice their concerns and ask if “their funds are safe.”

Prosecutors allege that the three executives were misleading customers about Cred’s lending and investment practices.

Cred allegedly claimed to only engage in “collateralized or guaranteed lending,” that its cryptocurrency investments were “hedged,” and that it maintained an “all weather approach” to investment to protect against volatility.

However, the prosecutors claimed that Cred engaged in lending that “was neither collateralized nor guaranteed.”

Related: Bankrupt crypto lender Genesis seeks approval to sell $1.6B of trust assets

Schatt and Podulka appeared in court for the first time on May 2 and must return to enter a plea on May 8. Alexander's initial court date has not yet been set.

The charges come as the former CEO of crypto lender Alex Mashinsky prepares for his sentencing hearing in September 2024, where he faces seven felony charges following the firm collapsing in July 2022.

Meanwhile, Genesis, another crypto lending firm that filed for bankruptcy in January 2023, is working to settle its debts with creditors. On April 2, Genesis liquidated around 36 million GBTC shares, generating $2.1 billion in Bitcoin.

Magazine: Meme coins: Betrayal of crypto’s ideals… or its true purpose?