TLDR
- Uphold rejects NYAG claims after agreeing to $5M CredEarn settlement
- NYAG says Uphold promoted CredEarn while failing to disclose key risks
- Uphold says Cred misled the company, customers, and CredEarn users
- Settlement adds new third-party product review duties for Uphold
- CredEarn dispute now centers on Uphold’s role in Cred’s collapse
Uphold rejected the New York Attorney General’s claims after agreeing to a $5 million CredEarn settlement. The company said the regulator misstated key facts and ignored its position as another party deceived by Cred. The dispute now turns on Uphold’s role in promoting the failed crypto yield product.
NYAG Says Uphold Promoted CredEarn
The New York Attorney General said Uphold promoted CredEarn as a reliable savings product. However, the regulator said Cred used customer crypto in risky lending activity. The office also said Uphold failed to disclose major risks tied to the product.
According to settlement details, Uphold advertised CredEarn through its website and mobile app. The activity ran from 2019 until October 2020, when Cred’s problems became public. More than 6,000 Uphold customers placed about $50 million into the product.
Those customers later lost more than $34 million after Cred collapsed. Besides, the regulator said Uphold promoted the product without proper registration. It also said no insurance protected retail customers from digital asset losses.
Uphold Rejects Claims After Settlement
Uphold gave a different account of the CredEarn dispute. The company said Cred misled Uphold, its customers, and other product users. It also denied any claim that it knowingly promoted Cred’s alleged fraud.
Uphold said it learned about Cred’s liquidity problems in October 2020. Moreover, it said it did not know Cred’s financial statements were false. The company said it froze Cred’s platform access within hours after discovering the issue.
Chief Executive Simon McLoughlin said Uphold felt disappointed by the regulator’s statement. He also said the Justice Department treated Uphold as a victim in its Cred case. Additionally, Uphold said it settled the matter without admitting liability.
Settlement Adds Compliance Duties
The settlement requires Uphold to pay $5 million in monetary relief. It also adds any first distribution from Uphold’s $545,189.97 bankruptcy claim to customer payments. Hence, the CredEarn settlement includes both cash relief and bankruptcy-linked recovery.
Uphold must now maintain a risk-based review process for third-party products. That process may include checks on financial records, insurance policies, compliance systems, and customer safeguards. It may also include security reviews and outside verification before product recommendations.
The case adds fresh context to crypto yield product oversight. CredEarn became part of a wider debate over platform duties and third-party risk. However, Uphold says the core issue remains Cred’s conduct, not its own intent.
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