New York Regulator Wraps Up $5 Million Settlement with Digital Asset Platform to Reimburse Affected Users
In a landmark settlement, Uphold HQ Inc. has agreed to compensate its customers to the tune of over $5 million for their losses incurred through CredEarn, a crypto investment product offered by Cred LLC. This development marks a significant milestone in the efforts of the New York Attorney General's office to bolster investor protection in the crypto space. As part of the agreement, Uphold will not only provide monetary restitution but also overhaul its review processes and register as a broker, underscoring the importance of robust regulatory adherence.
The settlement, announced by New York Attorney General Letitia James on April 29, 2026, stems from an investigation that revealed CredEarn was marketed deceptively, with its risks downplayed and its benefits exaggerated. Despite being presented as a savings-style product, CredEarn was, in reality, a high-risk lending scheme that extended credit to video game players in China who lacked credit histories and stable incomes. Furthermore, Uphold had claimed that Cred possessed comprehensive insurance, which proved to be untrue, leaving retail investors without a safety net.
Attorney General James emphasized the gravity of Uphold's actions, stating that investors have the right to trust the advice they receive, and her office will continue to hold accountable those who compromise their customers' financial security. The investigation also exposed Uphold's failure to register as a broker or commodity broker-dealer under New York law, a critical oversight that contributed to the regulatory issues surrounding CredEarn.
The case highlights the risks associated with offering third-party crypto products through customer-facing platforms, as these can create significant regulatory exposure. CredEarn's demise began in March 2020, when its risky lending practices and mismanagement led to substantial losses, ultimately resulting in the company's bankruptcy in November 2020. Thousands of Uphold customers worldwide suffered losses amounting to millions of dollars.
Under the terms of the settlement, Uphold will be required to strengthen its due diligence policies and maintain a higher level of scrutiny when partnering with or recommending third-party investment products. The company will also register as a broker with the Office of the Attorney General, a move that will help ensure compliance with New York law.
This settlement is part of a broader enforcement effort by the New York Attorney General's office, which has been actively pursuing cases related to crypto and investor protection since 2014. The office has used the Martin Act of 1921 to pursue financial fraud cases without needing to prove intent, resulting in over $2.5 billion in restitution and penalties. Recent cases have included actions against major firms such as Genesis Global, Gemini, and DCG, as well as lawsuits against Coinbase and Gemini over prediction markets.
The repayment plan will see Uphold distribute over $5 million to affected customers, a sum that exceeds five times the fees the company collected from the CredEarn arrangement. Additionally, Uphold will transfer any recovery it receives from Cred's bankruptcy proceedings, totaling $545,189, to affected customers. Investors will receive notification from Uphold regarding the distribution of funds to their accounts. Attorney General James cautioned that the consequences of crypto companies breaking the law and misleading investors can be devastating, emphasizing the importance of robust regulatory compliance. With this settlement, Uphold has taken a significant step towards rectifying its past mistakes and ensuring a higher level of protection for its customers going forward.