New York Attorney General Letitia James has reached a settlement with cryptocurrency platform Uphold, requiring the company to pay over $5 million to customers who incurred losses from the CredEarn product. The agreement, finalized on April 29, stems from Uphold’s promotion of CredEarn, a third-party yield-generating product operated by Cred LLC, between January 2019 and October 2020. Cred LLC subsequently filed for bankruptcy in November 2020.
This settlement, structured as an Assurance of Discontinuance under New York’s Martin Act, marks the first instance of New York’s enforcement actions targeting a platform that promoted another entity’s crypto yield product, rather than directly penalizing the product’s issuer. Uphold acknowledged the factual findings presented by the Attorney General’s office while not admitting to legal liability.
Key Takeaways
- Uphold has agreed to a settlement of over $5 million with the New York Attorney General’s office regarding its promotion of the CredEarn yield product.
- The action is the first of its kind in New York, focusing on a platform that promoted a third-party crypto yield product.
- Uphold promoted CredEarn as secure, failing to disclose the opaque methods used to generate yields, which involved lending customer assets to a Chinese microlender for high-risk loans.
- The settlement requires Uphold to implement robust due diligence processes for vetting third-party products.
- Uphold’s CEO contested the Attorney General’s characterization, stating the DOJ identified Uphold as a victim in a separate criminal case against Cred.
The Attorney General’s investigation revealed that Uphold presented CredEarn as a secure, savings-like investment, omitting crucial details about the origin of its yields. Cred generated returns by channeling customer assets through MoKredit, a Chinese microlender that issued uncollateralized, short-term loans to individuals with no credit history, often for very small amounts. Additionally, Uphold relayed Cred’s unsubstantiated claim of “comprehensive insurance,” despite the absence of such coverage for retail investors in the digital asset sector at that time.
Approximately 6,000 Uphold customers invested around $50 million in CredEarn through the platform. The collapse of Cred resulted in losses exceeding $34 million for these investors. The bankruptcy proceedings for Cred generated over 6,000 claims totaling $140 million, with an estimated valuation of over $1 billion based on crypto prices in August 2025, according to Department of Justice filings.
The $5 million settlement figure substantially exceeds the fees Uphold earned from facilitating the CredEarn product. Furthermore, Uphold is obligated to transfer any recoveries it receives from Cred’s bankruptcy proceedings, where it holds a claim of $545,189.
Uphold’s Response and Legal Implications
Uphold CEO Simon McLoughlin publicly stated that the Attorney General’s office inaccurately portrayed the situation and that the settlement does not allege Uphold knowingly participated in a fraudulent scheme. McLoughlin emphasized that the U.S. Department of Justice, in its criminal investigation into Cred, identified Uphold as a victim and cleared it of responsibility for Cred’s actions.
Uphold asserts that it suspended Cred’s platform access promptly upon learning of the losses in October 2020 and urged Cred to self-report to regulatory authorities. A spokesperson for Uphold indicated that only 21 of the affected investors were New York residents.
The settlement documents note that Cred’s former CEO, Daniel Schatt, later joined Uphold’s board. Federal indictments confirm Schatt’s directorship at the crypto exchange hosting CredEarn from April 2018. Uphold clarified that Schatt served on the board of a separate entity, Uphold Ltd., and that Cred operated independently.
Daniel Schatt and Cred CFO Joseph Podulka have pleaded guilty to wire fraud conspiracy. Schatt received a 52-month sentence, and Podulka received a 36-month sentence in August 2025. The indictment alleges that by January 2020, Cred had lent approximately $40 million, or about 80% of its assets, to MoKredit. Following a market downturn in March 2020, Cred allegedly used new customer deposits to fund earlier redemptions.
Precedential Regulatory Shifts
This settlement establishes a significant legal precedent by focusing on the promotional aspect of a crypto yield product rather than solely its issuer. The Attorney General’s office determined that Uphold operated as an unregistered broker and commodity broker-dealer under New York state law.
This legal approach mirrors the strategy employed by the SEC in its 2022 settlement with BlockFi, which centered on BlockFi as the issuer of unregistered securities. The New York action, however, extends liability to the platform that facilitated the promotion of such products.
The New York Attorney General’s office has been actively pursuing enforcement actions within the cryptocurrency sector under the Martin Act, including substantial settlements with Genesis Global Capital in May 2024 and Gemini in June 2024.
As part of the settlement terms, Uphold is mandated to implement a formal due diligence framework for evaluating third-party products. This framework includes thorough reviews of audited financials, insurance policies, compliance protocols, and direct engagement with independent auditors and industry competitors.
Uphold is reportedly exploring a potential U.S. Initial Public Offering (IPO), with an independent financial advisory firm engaged to assess options at a valuation exceeding $1.5 billion. The company does not currently serve New York-based customers and has submitted an application for a BitLicense with the state’s Department of Financial Services.
Learn more at : www.theblock.co