SKN | New York Forces Uphold to Pay $5M Over Misleading Crypto Investment Scheme

Key Points:

• New York Attorney General’s Office secured a $5M settlement from Uphold, over misleading promotion of the CredEarn crypto product.

• Regulators found undisclosed risks and false safety claims, including high-risk lending practices and lack of investor protection.

• The case highlights rising scrutiny on crypto platforms, emphasizing transparency, compliance, and accountability in marketing investment products.

Settlement Targets Misleading Crypto Product Promotion

New York Attorney General’s Office, led by Letitia James, has secured a $5 million settlement from Uphold over its role in promoting a crypto investment product that allegedly misled users about risk and safety.

The case centers on CredEarn, a savings product offered by Cred LLC and its CEO Daniel Schatt. Between 2019 and 2020, Uphold marketed the product as a secure, high-yield savings option through its app and platform, attracting retail investors with promises of reliable returns.

Hidden Risks Behind “Safe” Returns

Regulators found that Uphold failed to disclose how Cred was actually generating those returns. Instead of low-risk strategies, the firm was issuing microloans to high-risk borrowers, including video game players in China with limited credit history and no access to traditional banking systems.

The Attorney General’s office also determined that claims of “comprehensive insurance” protecting users were misleading and inaccurate, as no such protection existed for crypto investors at the time.

In addition, Uphold was found to be operating without the necessary broker-dealer registration, raising further compliance concerns.

Collapse of Cred Leaves Investors Exposed

Cred LLC began suffering losses in early 2020 due to its risky lending model and eventually filed for bankruptcy later that year. The collapse left thousands of investors — including many Uphold users — facing significant losses.

Under the terms of the settlement, Uphold will pay $5 million directly to affected customers, an amount that exceeds the fees it earned from promoting the product.

Any additional funds recovered through Cred’s bankruptcy proceedings will also be distributed to impacted users, providing a pathway for partial recovery.

Regulatory Pressure on Crypto Platforms Intensifies

The case highlights growing scrutiny of crypto platforms that promote third-party financial products without fully disclosing risks. Authorities are increasingly focusing not just on fraud itself, but also on how platforms market and distribute investment opportunities.

Letitia James emphasized that investors must be able to rely on accurate information when making financial decisions, signaling continued enforcement against misleading practices in the digital asset sector.

Broader Legal Tensions in Crypto Oversight

The settlement comes amid a wider regulatory push in New York targeting crypto-related activities. The state has recently taken action against major platforms over issues ranging from investment products to prediction markets, reflecting a broader effort to assert oversight in the rapidly evolving digital asset space.

At the same time, jurisdictional tensions remain, with federal regulators such as the Commodity Futures Trading Commission challenging state-level enforcement in certain areas, particularly around financial derivatives and prediction markets.

Trust and Transparency Remain Central Challenges

The Uphold case underscores a persistent issue in crypto markets: the gap between marketing narratives and underlying risk.

As digital assets become more integrated into mainstream finance, regulators are placing increasing emphasis on transparency, proper disclosures and accountability. Platforms that fail to meet these expectations risk not only financial penalties but also long-term reputational damage.