Crypto Platform Uphold Faces $5M Blow From New York Regulators

Uphold will hand over more than $5 million to customers it helped deceive — a payout that amounts to over five times what the company actually earned from the deal.

A Settlement With Real Teeth

New York Attorney General Letitia James announced the settlement this week, closing the book on Uphold’s role in promoting CredEarn, a crypto savings product run by Cred, LLC and its CEO Daniel Schatt.

From January 2019 through October 2020, Uphold pushed CredEarn to users through its platform and mobile app, billing it as a safe place to park money and earn solid annual returns. What users weren’t told was how those returns were actually being generated.

Cred was funding them through microloans to low-income video game players in China — borrowers who had no credit histories and no access to traditional banks. That detail never made it into Uphold’s pitch to customers.

The Insurance Claim That Wasn’t True

The misleading promotion didn’t stop at vague language. According to the AG’s office, Uphold told customers that Cred carried comprehensive insurance. That claim was false. No such insurance protecting retail investors from crypto losses existed in the industry at the time. On top of that, Uphold was operating without the required broker or commodity broker-dealer registration.

The risks caught up with everyone. Cred began racking up losses from its lending practices in March 2020. Eight months later, the company filed for bankruptcy. Thousands of Uphold customers worldwide were left with nothing to show for their deposits.

Under the terms of the settlement, affected users will be paid directly from the $5 million fund. Uphold is also owed $545,189 from Cred’s ongoing bankruptcy proceedings — and any money recovered from that process will be passed along to harmed investors as well. Customers can expect an email notification when funds reach their accounts.

“Investors should be able to trust the industry advice they receive,” James said in a statement, adding that her office would continue holding bad actors accountable for putting customers’ finances at risk.

Featured image from Finder, chart from TradingView