The New York Attorney General Letitia James has secured more than $5 million from crypto platform Uphold to reimburse investors harmed by the failed CredEarn product, a crypto savings scheme tied to the now-bankrupt lending firm Cred LLC. The settlement resolves allegations that Uphold promoted CredEarn between January 2019 and October 2020 without adequate due diligence, exposing over 6,000 customers to losses exceeding $34 million.
According to the Office of the Attorney General (OAG), Uphold customers invested approximately $50 million worth of cryptocurrency into CredEarn through the Uphold platform. The product was marketed as a reliable crypto savings product with interest payments, but the OAG determined that customer funds were deployed through MoKredit into short-term micro-loans to Chinese video gamers with low monthly incomes, no credit histories, and no access to traditional credit. New York also said Uphold told users that Cred had “comprehensive insurance,” a claim the office found false, noting no such insurance protected retail investors from digital asset losses at the time.
Under the settlement, Uphold will pay more than $5 million directly to affected customers — an amount 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. Cred LLC filed for bankruptcy in November 2020 after its CEO Daniel Schatt and other executives were accused of mismanaging customer funds. The OAG’s investigation concluded that Uphold made misleading statements or omissions when promoting CredEarn and failed to register as a broker or commodity broker-dealer in New York.
Uphold has disputed parts of the state’s framing. CEO Simon McLoughlin said he was “deeply disappointed” and called the Attorney General’s statement “profoundly inaccurate.” The company noted that the U.S. Department of Justice identified Uphold as a victim in its criminal prosecution of Cred executives and that the settlement contains no admission of liability.
The enforcement action signals that state regulators are willing to pursue platforms that serve as distribution channels for high-risk products, even when the platform itself did not operate the underlying scheme. The settlement requires Uphold to institute a risk-based due diligence process for any future third-party products offered on its platform.
