Uphold filed a motion with the bankruptcy court in Delaware to dismiss Cred’s complaints about Uphold owing $783.9M to its liquidation trust.
CredEarn, an interest-bearing product that offered high yields to the firm’s clients, is the cause of the ongoing dispute between Cred and Uphold.
In November 2020, Cred filed for bankruptcy protection after reportedly losing corporate funds due to fraud.
Later, in June 2022, the bankrupt lender accused Uphold of misleading users by falsely advertising the CredEarn product as an insured and fully-hedged offering. Cred’s lawsuit alleged that Uphold was fully aware of the regulatory risks associated with CredEarn, noting,
“Rather than take on all of these risks, Uphold and [Cred’s CEO] Schatt decided to shift the risks away from Uphold by running [the Earn product] through Cred.”
Furthermore, Cred claimed that clients’ funds that were moved through Uphold’s exchange amounted to $783.9M when the crypto market was at its peak.
In response, Uphold called Cred’s claims “incoherent, conclusory, and conspiratorial.” Uphold also clarified that it was not responsible for Cred’s bankruptcy. According to its court filing, Uphold did not design or control CredEarn as the service was managed independently by Cred.
“Cred was responsible for designing, maintaining, and operating CredEarn. Cred had sole discretion over how to invest customer funds and hedge against market risks.”
