New York Attorney General Letitia James has secured more than $5 million from crypto platform Uphold.
Summary
- Uphold will pay over $5 million directly to customers affected by the failed CredEarn product.
- New York said CredEarn users were not told about risky lending behind advertised returns clearly.
- The settlement adds to New York’s wider enforcement push against crypto products and market operators.
The settlement relates to Uphold’s promotion of CredEarn, a crypto savings product tied to Cred, LLC.
The New York Attorney General’s office said Uphold promoted CredEarn between January 2019 and October 2020. The product was marketed to users through Uphold’s platform and mobile app as a reliable crypto savings product with interest payments.
The settlement said CredEarn came from Cred, LLC and its CEO Daniel Schatt. New York said the product misled investors because customers did not receive a clear view of the risks behind the advertised returns.
New York says key risks were not disclosed
The Attorney General’s office said Uphold did not tell customers that Cred used funds to make risky loans to borrowers in China. Those borrowers included low-income video game players with no credit histories and limited access to banks.
New York also said Uphold told users that Cred had “comprehensive insurance.” The office found that claim false, saying no such insurance protected retail investors from digital asset losses at the time.
Additionally, Cred began facing losses from its lending activity in March 2020. It filed for bankruptcy later that year, leaving thousands of Uphold customers with losses after they had placed digital assets into CredEarn.
Under the settlement, Uphold will pay more than $5 million directly to affected customers. The amount is more than five times the fees Uphold collected from the arrangement. Any money Uphold recovers from Cred’s bankruptcy case will also go to harmed investors.
Uphold registration issue adds pressure
The Attorney General’s office also said Uphold operated without required broker or commodity broker-dealer registration. The settlement document states that digital assets are commodities under New York’s Martin Act and that Uphold failed to register while offering crypto and promoting CredEarn.
James said, “Investors should be able to trust the industry advice they receive.” Uphold has disputed parts of the state’s framing. Its CEO Simon McLoughlin said he was “deeply disappointed” and called the Attorney General’s statement “profoundly inaccurate.”
New York keeps pressure on crypto firms
The Uphold settlement comes as New York continues its wider crypto enforcement push. Last month, the state sued Coinbase and Gemini over prediction market offerings, alleging that the products violated state gambling laws.
The CFTC later sued New York in federal court, arguing that federal law gives it authority over prediction markets. The separate dispute shows how state and federal regulators are still contesting control over parts of the crypto market.
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