Lawsuit Filed Against Upstart Holdings Over AI Model Issues

Gainey McKenna & Egleston announces class action lawsuit against Upstart for misleading investors about its AI model's performance.

Apr. 8, 2026 at 5:00pm

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A photorealistic studio still life featuring a stack of legal documents, a calculator, and a gavel arranged on a clean, monochromatic background, symbolizing the abstract concepts of corporate strategy, finance, risk, and legal proceedings.A class action lawsuit alleges Upstart's AI model issues misled investors about the company's financial performance.NYC Today

A class action lawsuit has been filed against Upstart Holdings, Inc. in the United States District Court for the Northern District of California on behalf of investors who purchased Upstart stock between May 14, 2025 and November 4, 2025. The lawsuit alleges that Upstart failed to disclose that its latest AI model, Model 22, frequently overreacted to negative macroeconomic signals, reducing borrower approvals and conversion rates, and negatively impacting the company's revenue and financial guidance.

Why it matters

The lawsuit highlights the risks and challenges facing fintech companies that rely heavily on AI models for their lending decisions. Upstart's issues with Model 22 underscore the importance of transparent and accurate disclosures to investors about the performance and limitations of these AI systems.

The details

The lawsuit alleges that Upstart, which operates a cloud-based AI lending platform, claimed that its proprietary AI models could more accurately quantify loan risk and lead to higher approvals and lower interest rates. However, the complaint states that Upstart failed to disclose that Model 22, the latest iteration of its AI model launched in May 2025, frequently overreacted to negative macroeconomic signals, reducing borrower approvals and conversion rates, and negatively impacting the company's revenue and financial guidance.

  • Upstart launched Model 22 in early May 2025.
  • On November 4, 2025, Upstart reported its Q3 2025 financial results and acknowledged that Model 22 had 'overreact[ed]' to macroeconomic signals, reducing borrower approvals and conversion rates.
  • The class period for the lawsuit is from May 14, 2025 to November 4, 2025.

The players

Gainey McKenna & Egleston

A law firm that has filed a class action lawsuit against Upstart Holdings, Inc. on behalf of investors.

Upstart Holdings, Inc.

A fintech company that operates a cloud-based AI lending platform in the U.S., offering unsecured personal loans, small dollar loans, auto refinance, auto retail loans, auto secured personal loans, and home equity lines of credit.

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What they’re saying

“Investors who purchased or otherwise acquired shares of Upstart should contact the Firm prior to the June 8, 2026 lead plaintiff motion deadline.”

— Thomas J. McKenna, Attorney, Gainey McKenna & Egleston

“A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.”

— Gregory M. Egleston, Attorney, Gainey McKenna & Egleston

What’s next

The lead plaintiff motion deadline for investors to join the class action lawsuit is June 8, 2026.

The takeaway

This lawsuit highlights the importance of fintech companies being transparent about the performance and limitations of their AI models, especially when those models play a critical role in their lending decisions and financial results.