Nikolas Sargeant
TL;DR
- New York Attorney General Letitia James announced an April 29 settlement with Uphold HQ Inc.
- The company will pay more than $5 million to customers who lost money through Cred’s CredEarn product.
New York Attorney General Letitia James has secured more than $5 million from Uphold over its role in promoting CredEarn. This third-party crypto yield product collapsed following the 2020 bankruptcy of Cred LLC.
The settlement, structured as an Assurance of Discontinuance under the Martin Act, requires Uphold to comply with findings from the attorney general’s office without admitting liability.
Misleading Marketing and Risk Disclosure Failures
Investigators found that Uphold marketed CredEarn as a safe, savings-like product while failing to disclose how yields were generated adequately. In reality, Cred produced returns by channeling user funds through MoKredit, which issued unsecured, short-term loans to low-income video game players, some as small as $1.45 and lacking traditional credit histories.
Uphold also echoed Cred’s claim that it carried “comprehensive insurance,” despite no existing insurance products at the time covering retail investors against digital asset investment losses.
More than 6,000 Uphold users invested roughly $50 million into CredEarn. When Cred collapsed, investor losses exceeded $34 million. According to the U.S. Department of Justice, Cred’s bankruptcy triggered over 6,000 claims totaling $140 million—valued at more than $1 billion based on August 2025 crypto prices.
The $5 million penalty is more than five times the fees Uphold earned from hosting CredEarn. The company must also surrender any recovery from Cred’s bankruptcy proceedings, where it is currently owed $545,189.
Additionally, Uphold is required to implement stricter due diligence measures for third-party offerings, including reviewing audited financials, insurance coverage, compliance systems, and conducting independent third-party checks.
Uphold Pushes Back
Uphold CEO Simon McLoughlin disputed the characterization of events, stating that regulators misrepresented the facts and that the settlement does not allege the company knowingly promoted fraud.
He emphasized that the DOJ’s investigation concluded that Uphold itself was a victim of Cred’s actions. The company also noted it froze Cred’s access within hours of discovering issues in October 2020 and urged the firm to report to regulators.
Cred CEO Daniel Schatt and CFO Joseph Podulka pleaded guilty to wire fraud conspiracy in May 2025. They were later sentenced to 52 months and 36 months in prison, respectively.
Court filings revealed that by early 2020, Cred had lent approximately $40 million—around 80% of its assets—to MoKredit. Following the March 2020 Bitcoin crash, the firm allegedly used new customer deposits to fulfill earlier withdrawals.
The settlement also highlighted Schatt’s prior role as a director linked to Uphold, though the company maintains this was within a separate entity and that Cred operated independently.
Despite regulatory challenges, Uphold is reportedly exploring a U.S. IPO, with its board appointing FT Partners to evaluate options at a valuation exceeding $1.5 billion.
The company currently does not serve New York residents but has applied for a BitLicense with the state’s Department of Financial Services as it seeks to expand its regulatory footprint.
