Uphold has pushed back against the New York Attorney General’s statement on its $5 million CredEarn settlement.
Summary
- Uphold says the NYAG statement misrepresented key facts about its $5M CredEarn settlement.
- The NYAG said more than 6,000 Uphold customers lost over $34M after Cred collapsed.
- Uphold said it froze Cred’s platform access within hours after learning about liquidity issues.
The company shared the update with crypto.news after the regulator said Uphold misled investors by promoting Cred LLC’s crypto yield product.
In its response, Uphold said the Attorney General’s statement misrepresented key facts about the settlement. The company also rejected any claim that it knowingly promoted Cred’s alleged fraud. Uphold said Cred misled the company, its customers and other CredEarn users.
NYAG says Uphold promoted CredEarn
The New York Attorney General said Uphold agreed to pay more than $5 million to harmed investors. The regulator said Uphold promoted CredEarn as a reliable savings product while Cred used customer crypto in risky lending activity.
The settlement document said Uphold advertised CredEarn on its website and mobile app from 2019 to October 2020. It also said more than 6,000 Uphold customers invested about $50 million through the product. Those customers later lost over $34 million after Cred collapsed.
Moreover, Uphold said it did not know about Cred’s liquidity issues until October 2020. It also said it was unaware that Cred’s statements about the financial health of CredEarn were false. The company said it froze Cred’s access to its platform within hours after learning about the issue.
Uphold CEO Simon McLoughlin said, “We are deeply disappointed by the New York Attorney General’s statement.” He also said the U.S. Department of Justice treated Uphold as a victim in its criminal case against Cred executives. Uphold said it settled without admitting liability.
Settlement adds new compliance duties
The settlement requires Uphold to pay $5 million in monetary relief. It also requires any initial distribution tied to Uphold’s $545,189.97 claim in the Cred bankruptcy case to be added to customer payments.
Uphold must also maintain a risk-based review process before recommending third-party products. That process may include checks on financial records, insurance policies, compliance policies, customer checks, security systems and outside verification.
Dispute centers on Uphold’s role
The Attorney General said Uphold promoted CredEarn without proper registration and failed to disclose key risks. The regulator also said no insurance existed to protect retail investors from digital asset investment losses, despite statements about Cred’s insurance coverage.
Uphold gave a different account. It said Cred deceived the company and that it acted to stop further customer exposure once it learned of Cred’s problems. The dispute now centers on whether readers should view Uphold mainly as a promoter of CredEarn or as another party deceived by Cred.
