Uphold Fined $5M Over Fraudulent Crypto Scheme Promoted in NY

The New York Attorney General’s office has secured a $5 million settlement from Uphold after the crypto platform was found to have promoted CredEarn, a fraudulent savings product. The move marks another victory for AG Letitia James in her ongoing efforts to crack down on deceptive practices in the cryptocurrency sector.

CredEarn, marketed as a high-yield savings product, promised users attractive annual interest rates. However, according to the Attorney General’s investigation, Uphold failed to disclose that Cred was generating these returns through risky microloans to low-income borrowers in China—individuals with no credit histories or access to traditional banking. On top of that, Uphold falsely claimed the product was covered by “comprehensive insurance,” a protection that didn’t exist for retail investors in the crypto space at the time.

Cred’s financial troubles became evident in March 2020, culminating in the company’s bankruptcy filing in October 2020. The collapse left thousands of Uphold users worldwide unable to recover their investments. Notably, Uphold also operated without the required broker or commodity broker-dealer registration, further compounding its legal troubles.

Under the settlement terms, Uphold will pay $5 million directly to affected customers, a figure that far exceeds the platform’s earnings from its partnership with Cred. Additionally, any funds Uphold recovers from Cred’s bankruptcy proceedings—where Uphold is listed as a creditor owed $545,189—will also be returned to investors. The Attorney General’s office stated that notifications will be sent to users by email once funds are disbursed.

“Investors should be able to trust the industry advice they receive,” AG Letitia James emphasized in a statement. “My office will always work to ensure bad actors are held accountable for endangering their customers’ financial security.”

New York’s Aggressive Crypto Oversight

This case is the latest in a series of high-profile enforcement actions led by James. Over the past few years, her office has targeted major players such as Coinbase, Gemini, KuCoin, and Nexo for alleged violations of New York laws, including operating without proper registration and misleading investors. These efforts have resulted in significant settlements, including $24 million from Nexo and over $22 million from KuCoin. James has positioned herself as one of the most aggressive regulators in the cryptocurrency space, with a clear focus on investor protection.

While her actions have drawn praise for holding companies accountable, they have also sparked tensions with federal regulators like the Commodity Futures Trading Commission (CFTC). The two agencies have clashed over jurisdictional authority, most recently in a dispute involving prediction markets run by Coinbase and Gemini.

For Uphold, the settlement serves as a costly reminder of the risks associated with promoting crypto products without due diligence or regulatory compliance. As regulatory scrutiny intensifies, platforms will likely face increasing pressure to provide full transparency and adhere to state and federal laws.

Investors affected by the CredEarn collapse should monitor their email accounts for updates on the settlement payouts, which are expected to be distributed in the coming months.

Image source: Shutterstock