Key Takeaways:
New York Attorney General Letitia James has secured more than $5 million from cryptocurrency platform Uphold for its role in promoting a high-risk third-party investment product, CredEarn, to its customers without proper disclosures or registration.
"Investors should be able to trust the industry advice they receive, and my office will always work to ensure bad actors are held accountable for endangering their customers’ financial security," James said in a statement announcing the settlement.
The investigation found that between January 2019 and October 2020, Uphold marketed CredEarn as a safe savings-style product offering attractive interest rates. However, the firm failed to disclose that Cred, the product's operator, was generating returns by making risky, uncollateralized microloans to low-income video game players in China. The Attorney General's office also found that Uphold falsely advertised that Cred carried "comprehensive insurance," when no such protection for retail investors against digital asset losses existed at the time.
This action is part of a broader regulatory push in New York to bring crypto markets under established investor protection rules. Cred began suffering major losses from its lending activities in March 2020 and filed for bankruptcy eight months later, leading to millions of dollars in losses for Uphold customers. Under the settlement, the $5 million payment represents more than five times the fees Uphold earned from the arrangement. Uphold must also pass on any funds it recovers from Cred’s bankruptcy proceedings, where it is owed $545,189, to the affected investors.
Beyond the financial restitution, the settlement requires Uphold to register as a securities and commodities broker-dealer with the Attorney General's office and to significantly improve its due diligence process for any future third-party investment products offered on its platform.
The Uphold case is the latest in a series of enforcement actions by the New York Attorney General against crypto firms, which have secured over $2.5 billion in restitution and penalties. Recent actions include lawsuits against Genesis Global, Gemini, and Digital Currency Group, as well as cases against Coinbase and Gemini over their prediction market offerings. The state's aggressive stance has created friction with federal regulators, prompting the Commodity Futures Trading Commission (CFTC) to sue New York, arguing that federal law gives it sole authority over prediction markets.
This article is for informational purposes only and does not constitute investment advice.
