New York Attorney General Letitia James announced April 29 that a cryptocurrency platform will pay more than $5 million to investors after promoting a fraudulent investment product that led to millions in losses when the company behind it collapsed.
The platform, Uphold HQ, Inc., was found to have misled customers by promoting CredEarn, an investment product offered by Cred, LLC, as a safe and reliable way to earn interest on cryptocurrency. According to the Office of the Attorney General, the product was anything but low-risk.
Authorities said Uphold offered CredEarn between January 2019 and October 2020 through its platform and mobile app, promising significant annual returns. In marketing materials, the company described the product as a dependable savings option and claimed it was backed by “comprehensive insurance.”
Investigators found those claims were misleading. Cred’s business model relied on issuing high-risk micro-loans to borrowers in China who had low incomes, no credit histories, and limited access to traditional financial institutions. No insurance existed that would have protected investors from losses in digital assets.
The Attorney General’s investigation also determined that Uphold promoted the investment product without registering as a broker or commodity broker-dealer, a violation of New York law.
Cred began suffering major financial losses in March 2020 due to its lending practices and internal mismanagement. The company filed for bankruptcy in November 2020, leaving thousands of investors worldwide facing significant financial losses.
Under the settlement, Uphold will pay $5 million to affected customers – more than five times the amount it collected in fees from the program. The company will also pass along any funds it recovers from Cred’s bankruptcy proceedings, where it is currently owed more than $545,000.
Investors who are eligible for compensation will be notified by email, and funds will be distributed directly to their accounts.
As part of the agreement, Uphold must also strengthen its due diligence practices when offering third-party investment products and register as a broker with the state.
Uphold pushed back on the Attorney General’s characterization of the case in a statement issued April 30, saying it did not knowingly promote a fraudulent scheme and was itself misled by Cred executives. The company said federal prosecutors previously identified it as a victim in the criminal case against Cred’s leadership.
Uphold said it was unaware of Cred’s financial problems until October 2020 and acted quickly once concerns surfaced, including cutting off Cred’s access to its platform and urging the company to notify regulators. The firm also emphasized that it did not admit wrongdoing as part of the settlement, describing the agreement as a resolution of regulatory issues related to marketing and registration requirements.
Attorney General James said the case highlights the risks of misleading financial promotions in the cryptocurrency industry and emphasized that enforcement efforts will continue against companies that fail to comply with the law.
The investigation was handled by the Attorney General’s Investor Protection Bureau, which focuses on financial fraud and investor safety.
Photo: Illustration
