Key Takeaways
- • Uphold HQ will pay $5 million to settle New York Attorney General allegations that it promoted a fraudulent cryptocurrency investment scheme (CredEarn) between January 2019 and October 2020.
- • The settlement compensation exceeds five times the fees Uphold collected from CredEarn, with all recovered funds from Cred's bankruptcy proceedings ($545,189 owed to Uphold) directed to harmed customers.
- • Uphold misrepresented CredEarn as a safe savings product with "comprehensive insurance" while failing to disclose that returns were generated through high-risk microloans to unvetted borrowers in China, violating state broker-dealer registration requirements.
- • Cred, LLC (led by CEO Daniel Schatt) filed for bankruptcy in November 2020 after accumulating losses from its lending practices starting March 2020, leaving thousands of Uphold customers globally with losses.
- • The enforcement action addresses Uphold's operation as an unregistered broker or commodity broker-dealer, a violation of New York securities law, with affected customers to be notified by email when compensation is distributed.
Summary
New York Attorney General Letitia James secured a $5 million settlement with cryptocurrency platform Uphold HQ Inc. over its promotion of CredEarn, a fraudulent digital asset investment product offered between January 2019 and October 2020. The settlement, announced on April 29, 2026, represents a significant enforcement action targeting misleading marketing practices in the cryptocurrency sector and addresses Uphold's regulatory violations in operating without proper broker-dealer licensing.
CredEarn, a product developed by Cred, LLC and its CEO Daniel Schatt, was marketed to Uphold users via the platform and mobile app as a secure savings vehicle offering attractive annual interest payments. However, Uphold failed to disclose the product's underlying mechanics: Cred generated returns through microloans extended to low-income video game players in China, typically borrowers with no credit histories and no access to conventional financial institutions. This high-risk lending strategy was never communicated to retail investors, creating a material information asymmetry. Additionally, Uphold made false claims regarding "comprehensive insurance" protection—a product that did not exist in the digital asset industry at the time—further misleading customers about downside risk mitigation.
Cred's operational model proved unsustainable. Beginning in March 2020, the company began accumulating significant losses from its risky lending practices. By November 2020, Cred filed for bankruptcy, leaving thousands of Uphold customers worldwide exposed to total loss. The collapse illustrated the absence of investor protections typical in regulated financial markets, underscoring systemic vulnerabilities in unregulated cryptocurrency investment products.
Under the settlement terms, Uphold will distribute $5 million directly to affected customers—more than five times the fees the company collected from the CredEarn arrangement. This recovery multiple reflects the severity of customer losses. Additionally, any funds Uphold recovers from Cred's ongoing bankruptcy proceedings, including $545,189 currently owed to Uphold, will be transferred to harmed investors. Affected customers will receive email notification when compensation is deposited into their accounts.
The enforcement action also addressed Uphold's operational licensing violations. The platform operated without required broker-dealer or commodity broker-dealer registration under New York securities law, a fundamental regulatory deficiency that enabled the promotion of an unsuitable, undisclosed investment product to retail customers. This settlement reinforces regulatory pressure on cryptocurrency platforms to maintain compliance with traditional securities licensing and disclosure standards.
CredEarn, a product developed by Cred, LLC and its CEO Daniel Schatt, was marketed to Uphold users via the platform and mobile app as a secure savings vehicle offering attractive annual interest payments. However, Uphold failed to disclose the product's underlying mechanics: Cred generated returns through microloans extended to low-income video game players in China, typically borrowers with no credit histories and no access to conventional financial institutions. This high-risk lending strategy was never communicated to retail investors, creating a material information asymmetry. Additionally, Uphold made false claims regarding "comprehensive insurance" protection—a product that did not exist in the digital asset industry at the time—further misleading customers about downside risk mitigation.
Cred's operational model proved unsustainable. Beginning in March 2020, the company began accumulating significant losses from its risky lending practices. By November 2020, Cred filed for bankruptcy, leaving thousands of Uphold customers worldwide exposed to total loss. The collapse illustrated the absence of investor protections typical in regulated financial markets, underscoring systemic vulnerabilities in unregulated cryptocurrency investment products.
Under the settlement terms, Uphold will distribute $5 million directly to affected customers—more than five times the fees the company collected from the CredEarn arrangement. This recovery multiple reflects the severity of customer losses. Additionally, any funds Uphold recovers from Cred's ongoing bankruptcy proceedings, including $545,189 currently owed to Uphold, will be transferred to harmed investors. Affected customers will receive email notification when compensation is deposited into their accounts.
The enforcement action also addressed Uphold's operational licensing violations. The platform operated without required broker-dealer or commodity broker-dealer registration under New York securities law, a fundamental regulatory deficiency that enabled the promotion of an unsuitable, undisclosed investment product to retail customers. This settlement reinforces regulatory pressure on cryptocurrency platforms to maintain compliance with traditional securities licensing and disclosure standards.
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