Class Action Lawsuit Filed Against Crypto Platform Uphold Over Allegedly Misleading Marketing of ‘Earn’ Product

On Thursday, April 25, 2024, a second amended class action lawsuit was filed in the United States District Court for the Southern District of New York against digital money platform Uphold HQ Inc. The lawsuit alleges consumer fraud and seeks damages for thousands of customers who invested in Uphold’s interest-earning product called CredEarn, or Earn, which promised returns on deposits of cryptocurrencies and other digital assets.

The suit claims that Uphold knew Earn carried significant risks but actively marketed it as a safe, traditional interest-earning product similar to a savings account without properly disclosing the underlying risks to consumers. In reality, the funds deposited in Earn were invested in Cred, Inc., a cryptocurrency lending firm that was grossly mismanaged and filed for bankruptcy in November 2020, causing customers to lose all their investments.

According to court documents, Uphold was aware of Cred’s troubled financial history, lack of proper accounting controls, and risky ties to a Chinese micro-lending firm through meetings and its representation on Cred’s board. One Uphold board member even warned in May 2020 that continuing to do business with Cred without more oversight could result in losses for customers and lawsuits against Uphold. However, Uphold allegedly failed to conduct a formal audit of Cred or make Cred’s risks clear to consumers.

The lawsuit maintains Uphold had a duty to disclose this material information, but continued marketing Earn using uniform materials without mention of Cred until just before its bankruptcy. Plaintiffs claim Uphold knew Earn was essentially an unsecured loan to Chinese gamers, not a secured, traditional banking product as promoted, and that Uphold’s actions constitute consumer fraud under New York law where many disputes are governed. The suit seeks restitution of lost funds and penalties.

Please contact BlockTribune for access to a copy of this filing.