What Did Uphold Do to Trigger the Settlement?
New York Attorney General Letitia James has secured more than $5 million from crypto platform Uphold over its role in promoting a fraudulent investment product known as CredEarn.
Between January 2019 and October 2020, Uphold marketed CredEarn, a product offered by Cred, LLC and its CEO Daniel Schatt, as a safe and reliable savings option with attractive annual interest payments. The promotion appeared across Uphold’s platform and mobile app, targeting retail users seeking yield on digital assets.
According to the Attorney General’s office, Uphold failed to disclose how those returns were generated. Cred was making microloans to low-income video game players in China, a borrower base with limited credit history and restricted access to traditional financial systems.
The platform also claimed that Cred’s product carried “comprehensive insurance,” which investigators found to be inaccurate. At the time, no such insurance existed to protect retail investors from digital asset losses.
How Did the Cred Collapse Affect Investors?
Cred’s business model began to break down in March 2020 as losses from its lending activity increased. The company filed for bankruptcy eight months later, leaving thousands of Uphold users exposed to losses.
Under the settlement, Uphold will pay $5 million directly to affected customers, an amount exceeding the fees it collected from the arrangement. Any funds recovered from Cred’s ongoing bankruptcy proceedings, where Uphold is owed $545,189, will also be distributed to impacted users.
Affected customers are expected to receive compensation directly, with notifications sent once funds are credited to their accounts.
“Investors should be able to trust the industry advice they receive,” James said, “and my office will always work to ensure bad actors are held accountable for endangering their customers’ financial security.”
Investor Takeaway
What Regulatory Failures Were Identified?
In addition to misleading product claims, Uphold was operating without the required broker or commodity broker-dealer registration, according to the Attorney General’s office. This added a compliance layer to the case beyond consumer protection violations.
The findings highlight gaps in oversight during the early phase of crypto lending products, when high-yield offerings were marketed without clear disclosure standards or regulatory alignment.
The CredEarn case reflects a broader pattern seen across crypto lending failures, where returns were linked to high-risk or opaque strategies that were not fully explained to users.
Investor Takeaway
How Does This Fit Into Broader US Regulatory Tensions?
The settlement comes as regulatory tensions continue across the US digital asset market. Last month, New York brought actions against Coinbase and Gemini over their prediction market offerings, arguing they violated state gambling laws.
The Commodity Futures Trading Commission responded by filing a federal lawsuit against New York, asserting that federal law grants it exclusive authority over prediction markets and seeking to block state-level enforcement.
This overlap between state and federal oversight continues to shape the regulatory landscape, with firms facing multiple layers of compliance risk depending on how products are structured and marketed.
