New York Attorney General Letitia James has secured more than $5 million from cryptocurrency platform Uphold for its role in promoting a fraudulent investment product.
The settlement centers around Uphold’s promotion of CredEarn, a product offered by Cred, LLC and its CEO Daniel Schatt. Between January 2019 and October 2020, the platform promoted CredEarn to users on its platform and mobile app as a safe and sound and reliable savings product with attractive annual interest.
What Uphold did not tell customers was that Cred generated those returns by making microloans to low-income video game players in China, who are typically borrowers without credit histories or access to classic financial institutions, the attorney general’s office said. he said in the advertisement.
Source: NEW YORK James
Uphold also told customers that Cred had “comprehensive insurance,” which the Attorney General’s office found to be false. At the time, no such insurance existed in the industry to protect retail investors against losses on digital assets. In addition to its misleading promotion, Uphold operated without the required broker or commodity broker-dealer registration.
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The collapse of credibility hits Uphold users
The release said Cred began generating losses as a result of risky lending practices in March 2020 and filed for bankruptcy eight months later, leaving thousands of Uphold customers around the world in distress.
Under the settlement, Uphold will pay directly affected customers $5 million, more than five times the fees collected under the settlement. Any funds recovered by Uphold as a result of Cred’s ongoing bankruptcy proceedings, in which it is owed $545,189, will also be distributed to affected investors. Affected users will be notified by email when funds are credited to their accounts.
“Investors should be able to trust the industry advice they receive,” James said, “and my office will always work hard to ensure that dishonest players are held accountable for threatening the financial security of their clients.”
Related: US government sues four states, RWAs exceed $30 billion
New York’s legal conflict with the CFTC
Last month, New York sued Coinbase and Gemini, claiming their prediction market offerings violate state gambling laws.
The CFTC responded by suing New York in federal court, arguing that federal law gives it exclusive authority over prediction markets, and asking for a lasting injunction blocking the state’s enforcement actions.
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