Uphold Refutes NYAG Allegations Following $5 Million CredEarn Settlement

TLDR

• Uphold disputes NYAG allegations following its agreement to a $5 million CredEarn settlement
• NYAG alleges Uphold marketed CredEarn without revealing critical risks
• Uphold asserts it, its clients, and CredEarn users were all misled by Cred
• The settlement imposes new third-party product review responsibilities on Uphold
• The CredEarn controversy now focuses on Uphold’s part in Cred’s failure

(SeaPRwire) –   Uphold has disputed the New York Attorney General’s allegations after consenting to a $5 million settlement related to CredEarn. The firm stated the regulator presented incorrect key facts and overlooked its status as another entity defrauded by Cred. The controversy currently hinges on Uphold’s involvement in marketing the unsuccessful crypto yield product.

NYAG Says Uphold Promoted CredEarn

The New York Attorney General alleged that Uphold marketed CredEarn as a secure savings product. However, the regulator stated Cred utilized customer cryptocurrency for high-risk lending practices. The Attorney General’s office also claimed Uphold did not reveal significant risks associated with the product.

As per the settlement terms, Uphold featured CredEarn advertisements on its website and mobile application. This promotional activity occurred from 2019 until October 2020, when Cred’s difficulties were publicly revealed. Over 6,000 Uphold clients invested approximately $50 million into the product.

These clients subsequently lost over $34 million following Cred’s collapse. Furthermore, the regulator contended Uphold promoted the product without appropriate registration. It also noted that no insurance coverage shielded retail customers from losses on digital assets.

Uphold Rejects Claims After Settlement

Uphold provided a contrasting narrative of the CredEarn controversy. The company claimed Cred deceived Uphold, its customers, and other users of the product. It also refuted any allegation that it intentionally promoted what is alleged to be Cred’s fraudulent scheme.

Uphold stated it became aware of Cred’s liquidity issues in October 2020. Furthermore, it claimed it was unaware that Cred’s financial statements were inaccurate. The company said it blocked Cred’s access to its platform within hours of uncovering the problem.

Chief Executive Simon McLoughlin expressed that Uphold was disappointed by the regulator’s remarks. He also noted that the Justice Department considered Uphold a victim in its case against Cred. Uphold additionally clarified that it resolved the issue without admitting any fault.

Settlement Adds Compliance Duties

The settlement mandates Uphold to provide $5 million in financial restitution. It also stipulates that any initial payout from Uphold’s $545,189.97 bankruptcy claim against Cred be added to customer compensation. Therefore, the CredEarn settlement encompasses both direct monetary relief and potential recovery from bankruptcy proceedings.

Uphold is now required to implement a risk-based evaluation procedure for third-party products. This process could involve assessments of financial documentation, insurance coverage, compliance frameworks, and consumer protections. It may also incorporate security audits and independent verification prior to endorsing any products.

This case provides new perspective on the supervision of crypto yield products. CredEarn has become a focal point in a broader discussion regarding platform responsibilities and risks from third parties. Nevertheless, Uphold maintains the fundamental problem is Cred’s actions, not its own intentions.