- Key insight: The Uphold settlement is the first New York enforcement action to target a platform that promoted someone else’s yield product rather than the issuer of the product itself.
- What’s at stake: Any U.S. bank that co-markets a partner’s investment product to New York customers may now face the same partner-vetting requirement James imposed on Uphold.
- Supporting data: More than 6,000 Uphold customers lost more than $34 million when Cred collapsed in November 2020; the $5 million settlement is more than five times the fees Uphold earned from CredEarn, according to the AG’s office.
Overview bullets generated by AI with editorial review.
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More than 6,000 customers of Uphold, a cryptocurrency platform, collectively lost more than $34 million in 2020 when the platform’s lending partner collapsed. The New York Attorney General exacted a price against Uphold this week: $5 million.
On Wednesday, the attorney general’s office announced a settlement that requires the platform, Uphold HQ, to pay the damages to harmed investors and register as a broker with her office for promoting a yield product without authorization.
“Uphold promoted risky investments and misled its customers to believe they were safe,” said New York Attorney General Letitia James in a
Uphold rejected James’ framing. CEO Simon McLoughlin said in a Wednesday press release he was “deeply disappointed by the New York Attorney General’s statement, which is profoundly inaccurate and misrepresents the facts of the case.”
The settlement contains no allegation that Uphold knew of Cred’s fraud, Uphold pointed out in its Wednesday press release.
Rather, the settlement accuses Uphold of making misleading statements and failing to register as a broker. In the Wednesday settlement, the company admitted the attorney general’s factual findings without admitting liability.
Additionally, the U.S. Department of Justice “correctly found that Uphold was a victim of Cred and was not in any way to blame for that company’s actions” in the federal prosecution of Cred’s executives, McLoughlin said in the Wednesday press release.
The
Uphold acted within hours to cut off Cred’s access to the platform when it learned of the losses, according to Uphold’s press release. The Wednesday settlement corroborates what Uphold learned in October 2020 and demanded Cred report the losses to regulators.
Cred LLC, the issuer of the yield product in question (named CredEarn), routed customer cryptocurrency through a Chinese microlender that made uncollateralized, two-week loans to young video gamers. Some of those loans ran as small as $1.45.
The settlement with Uphold takes the form of an
It ends an investigation into Uphold’s promotion of the gamer-funded CredEarn yield product between January 2019 and October 2020. James’ office had been conducting the investigation under the Martin Act, the state’s main investor-protection statute.
The settlement also compels Uphold to write a process for vetting partners before recommending their products to customers. That process resembles a third-party risk-management policy, the kind of program New York requires bank compliance teams maintain.
Including that process requirement in the settlement now gives New York’s Investor Protection Bureau a written standard to cite the next time a regulated platform pushes a partner’s investment product, and the product fails.
What Uphold admitted
Uphold and Cred jointly built CredEarn’s marketing, according to the settlement.
Uphold ran a website banner reading “Earn with Cred. Start earning up to 10% on your digital assets” and sent marketing emails. A January 2019 newsletter from Uphold profiled CredEarn as a “revolutionary savings product offered exclusively through Uphold.”
Uphold also featured Cred on its webpage about the platform’s third-party integrations. A customer who clicked through landed in a Cred-branded sign-up flow that pooled investor cryptocurrency in a Cred-controlled Uphold account.
Both companies told customers that Cred carried real insurance. A June 2019 joint press release from the two companies said Cred had “some of the most comprehensive insurance offered in the crypto lending sector.” Cred made similar claims in customer emails.
The settlement called those statements misleading. No insurance product in the industry covered customer digital assets against investment loss, and Cred’s actual policies were limited to ordinary directors-and-officers, cyber and property-casualty coverage, none of which would have made investors whole if Cred failed.
The settlement also details what Uphold knew about MoKredit, the Chinese microlender, which a Cred co-founder owned. MoKredit was the main borrower of CredEarn cryptocurrency, lending it to Chinese video gamers in their 20s and 30s with no credit histories at interest rates often above 35%.
The loans were uncollateralized and ranged from $1.45 to $290 over 14 days.
Uphold did not pass along to its customers any information about the provenance of the yields their accounts were earning, according to the settlement.
The settlement also notes that Daniel Schatt, Cred’s co-founder and CEO, later became a director of Uphold.
More than 6,000 customers invested roughly $50 million in CredEarn through Uphold’s platform, the settlement says. Investor losses topped $34 million when Cred collapsed in November 2020.
An Uphold spokesperson told American Banker that 21 of the harmed investors were New York residents, “none of whom were trading cryptocurrencies via Uphold.”
The settlement says Daniel Schatt, Cred’s co-founder and CEO, “later became a director of Uphold,” suggesting a close tie between the two companies and creating a strong implication that Uphold should have known about Cred’s conduct in the lead-up to its collapse.
An Uphold spokesperson told American Banker that Schatt sat on the board of Uphold Ltd., a separate entity from the Uphold subsidiary that operated CredEarn, from April 2018 until October 2020.
The spokesperson said Cred operated independently from Uphold and contracted with the company on an arms-length basis.
The parts of the settlement bankers should read twice
The $5 million is both a victim fund for harmed investors and a penalty on Uphold. James’ office described the figure in Wednesday’s press release as “more than five times the amount [Uphold] earned in fees” from CredEarn.
Uphold will also contribute to the victim fund any distribution it eventually receives on a $545,189 general unsecured claim it filed in Cred’s Chapter 11 case in federal bankruptcy court in Delaware.
Being forced to register as a broker will have a bigger impact on day-to-day operations. James’ office found Cred’s customer agreements were investment contracts and securities under the Martin Act and that digital assets are commodities under the same statute.
Uphold, by promoting CredEarn and by offering crypto on its own platform, acted as both a broker and a commodity broker-dealer under New York’s General Business Law. But it hadn’t registered as either. Registration changes how Uphold operates in New York.
Per the settlement, Uphold must now “institute and maintain a risk-based due diligence process and underwriting criteria” before recommending a partner’s products to customers.
The settlement lists, “as appropriate,” the items that review must cover: corporate documents, insurance policies, organization charts, regulatory filings, conflicts of interest, audited financials, compliance and risk policies, security and technology, and customer-protection measures.
The settlement also expects Uphold, “as appropriate,” to interview “accountants, auditors, experts, or competitors” to verify what a partner says about itself.
Uphold must establish a segregated reimbursement account within 14 days, notify eligible investors within 20 days, distribute funds within 150 days, and certify it has completed the distribution within 180 days.
Anything left in the account at the end of that period reverts to the attorney general’s office.
The Cred fraud and federal case
Cred’s bankruptcy generated more than 6,000 claims totaling over $140 million. At August 2025 cryptocurrency prices, those claims were worth more than $1 billion, according to the federal sentencing memorandum.
The
The indictment also lays out the timeline. By January 2020, Cred had lent MoKredit roughly $40 million, about 80% of Cred’s assets. A bitcoin flash crash in March 2020 left Cred underwater on its hedges and MoKredit unable to repay principal.
Six days after the crash, Schatt told customers in a public Q&A session that Cred’s business was “operating normally.”
Schatt and Cred CFO Joseph Podulka pleaded guilty to wire fraud conspiracy in May 2025. In August, a federal judge in San Francisco sentenced Schatt to 52 months in prison and Podulka to 36 months.
“This prosecution should serve as a reminder that my office will aggressively prosecute fraud schemes undermining the integrity of cryptocurrency markets,” U.S. Attorney Craig H. Missakian said in an
New York’s enforcement run, and what it signals
James has spent years building a state crypto-enforcement portfolio. In May 2024, her office secured a $2 billion
Other recoveries followed a similar pattern of misleading conduct or unregistered activity by crypto platforms and token issuers:
Uphold’s case is the first to reach a platform that promoted someone else’s yield product rather than the issuer of the product itself.
James’ office has been targeting unregistered crypto-lending platforms since at least 2021.
Four and a half years before the Uphold settlement, in October 2021, the office sent
After this article was published, a spokesperson for James’ office declined to tell American Banker whether the Uphold settlement is a template for further actions against partner-promotion arrangements.
Asked whether the settlement offered a novel third-party-promotion standard, the spokesperson pointed to
Federal regulators have pursued similar cases. The Securities and Exchange Commission, or SEC, reached a
The settlement marked Gary Gensler’s first crypto-lending case as SEC chair. The SEC found BlockFi’s interest accounts were unregistered securities.
The Uphold settlement extends that doctrine. A state attorney general can punish a promoter of someone else’s yield product, not just the issuer of the product.
An SEC spokesperson, asked whether the agency had ever brought, declined to bring or considered enforcement action against Uphold, Cred or any of Cred’s executives in connection with CredEarn, pointed American Banker to
The spokesperson declined to comment on whether CredEarn fell within the scope of the broader SEC review of crypto-lending products that produced the BlockFi settlement.
Uphold does not appear on New York’s
An Uphold spokesperson told American Banker that the company currently does not serve New York customers at all but did not say when it stopped.
Uphold has filed a BitLicense application with the Department of Financial Services and intends to offer services to New York residents once that application is approved, the spokesperson said.
Uphold has also received provisional registration with the office of the attorney general under the Martin Act, the spokesperson said.
Operating in New York without a BitLicense did not insulate Uphold from James’ office. Her settlement turns on broker registration under New York’s General Business Law, a separate authority from the Department of Financial Services’ licensing regime.
A spokesperson for the Department of Financial Services did not immediately respond to a request for comment about whether the department is examining Uphold’s conduct or how its BitLicense regime interacts with the broker-registration framework James’ office invoked.
The next case from James’ office to apply the same partner-vetting requirement will show whether she treats it as the standard for any platform serving New York, including any U.S. bank co-marketing a partner’s investment product.