New York Attorney General Letitia James secured a settlement of more than $5 million from crypto platform Uphold. The case centers on the promotion of CredEarn, a savings product marketed to users without disclosing its real risks. All proceeds will go directly to affected investors.
What Uphold Did Not Tell Its Users
From early 2019 through October 2020, Uphold promoted CredEarn through its mobile app and web platform. The product offered attractive annual interest rates and was presented as a reliable way to earn returns on crypto savings. Behind it stood Cred LLC and its CEO Daniel Schatt. The actual mechanism generating those returns went unmentioned in marketing materials. Cred produced income by issuing microloans to low-income video game players in China. These borrowers had no credit histories and no access to traditional banks, meaning the default risk in that portfolio was far higher than Uphold led its customers to believe. Beyond withholding risk information, Uphold made outright false claims. The platform told users that Cred carried "comprehensive insurance" protecting their funds. The AG's investigation found no such product existed. No insurance covering retail investors against losses in Bitcoin or other digital assets was available in the market at the time. Uphold was also operating without the required broker or commodity broker-dealer registration under New York law.
How Cred Collapsed and Who Got Hurt
Cred began accumulating losses from its risky lending strategy in March 2020. Eight months later, the company filed for bankruptcy. Thousands of Uphold customers worldwide found themselves unable to access their funds.
The Cred bankruptcy proceeding remains open. Uphold is listed as a creditor owed $545,189. Under the terms of the agreement, any funds Uphold recovers from that proceeding will also flow to harmed investors rather than back to the company.
How Compensation Will Work
The $5 million-plus settlement will be paid directly to clients who participated in CredEarn. That sum exceeds by more than five times the fees Uphold actually earned from promoting the product. Affected customers will receive an email notification when funds arrive in their accounts. No action is required on their part. "Investors should be able to trust the industry advice they receive," James said in the announcement. "My office will always work to ensure bad actors are held accountable for endangering their customers' financial security."
New York's Broader Push Against Crypto Platforms
The Uphold case fits a broader enforcement campaign by the AG's office. Last month, New York filed suits against Coinbase and Gemini, arguing their prediction market products violated state gambling laws. The CFTC pushed back by suing New York in federal court, seeking a permanent injunction against those state enforcement actions. The conflict between state and federal oversight puts crypto exchanges and platforms in a difficult position. Different jurisdictions impose different requirements, and federal rules are not yet settled. The CredEarn case covers conduct from 2019 and 2020, confirming that older violations can surface years later with consequences that far exceed any gains made at the time.
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