New York Attorney General Letitia James secured a $5 million settlement from cryptocurrency platform Uphold for promoting a fraudulent investment product called CredEarn. Uphold marketed the product as safe without disclosing that its partner, Cred LLC, used risky microloans in China. The settlement requires Uphold to pay restitution directly to affected customers.
New York Attorney General Letitia James secured more than $5 million from cryptocurrency platform Uphold over its role in promoting a fraudulent investment product. The settlement centers around Uphold’s promotion of CredEarn, a product offered by Cred, LLC and its CEO Daniel Schatt.
Between January 2019 and October 2020, the platform marketed CredEarn to users as a safe, reliable savings product with attractive annual interest payments. However, Uphold didn’t tell customers that Cred was generating those returns by making microloans to low-income video game players in China, who are typically borrowers with no credit histories, according to the Attorney General’s office.
Uphold also told customers that Cred carried “comprehensive insurance,” a claim found to be false. The Attorney General’s office stated no such insurance protecting retail investors from digital asset losses existed in the industry at the time. Uphold was also operating without the required broker or commodity broker-dealer registration.
Cred began racking up losses from its risky lending practices in March 2020 and filed for bankruptcy eight months later, leaving thousands of Uphold customers affected. Under the settlement, Uphold will pay $5 million directly to those customers, more than five times the fees it collected.
Any funds Uphold recovers from Cred’s ongoing bankruptcy proceedings, where it is owed $545,189, will also be passed on to harmed investors. “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.” Affected users will be notified by email when the funds are distributed.
