REGULATION | Crypto Platform Pays a 5x Penalty for Misleading Investors on Crypto Risk

New York Attorney General, Letitia James, has secured more than $5 million from cryptocurrency platform, Uphold, for misleading investors by promoting a fraudulent investment scheme, authorities said.

The settlement follows an investigation which found that Uphold marketed a product known as CredEarn, offered by lender Cred LLC, as a safe and reliable way for customers to earn interest on their crypto holdings, without adequately disclosing the risks.

According to the attorney general’s office, Cred generated returns by issuing high-risk loans, including to borrowers in China with little or no credit history, a practice that was not clearly communicated to investors.

“Investors should be able to trust the industry advice they receive,” James said, “and my office will always work to ensure bad actors are held accountable for endangering their customers’ financial security.”

Cred collapsed in 2020 after suffering heavy losses leaving thousands of investors globally with significant financial losses.

Regulators also said Uphold falsely suggested the product was covered by comprehensive insurance and failed to register as a broker or dealer as required under New York law.

Under the agreement, Uphold will pay $5 million in restitution to affected users – more than five times the fees it earned from the product – and will strengthen its due diligence and compliance procedures when offering third-party investment products.

The company will also direct any funds it recovers from Cred’s bankruptcy proceedings to impacted customers, authorities said.

The case adds to growing scrutiny of crypto platforms’ role in promoting third-party investment products and highlights regulators’ focus on investor protection in the sector.

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