California, New York, and 6 Other States Sue Crypto Lender Nexo
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California, New York, and 6 Other States Sue Crypto Lender Nexo

Eight states sued the crypto lender Nexo for allegedly offering unregistered securities and misleading investors that the company was in compliance with state laws.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Several States including New York and California filed complaints against the crypto lender Nexo over one of its programs. Other states that believe Nexo is in fact offering unregistered securities are Washington, Maryland, Kentucky, Oklahoma, South Carolina, and Vermont

California’s DFPI Issues Cease-and-Desist to Crypto-Lender Nexo

In the latest action of the investigative efforts undertaken by California’s DFPI and other state regulators, Nexo received a series of complaints on Monday. Previously,  BlockFi Lending LLC, Voyager Digital LLC, and Celsius Network Inc. received such suits from authorities around the US. The announcements made special mention of the fact that companies Celsius and Voyager filed for bankruptcy in the meantime.

According to complaints like the one filed in California, the Earn Interest Product accounts, run by Nexo and marketed to its users as a way of earning interest on crypto, in fact, constitute an unregistered securities offering. The rates are different between various cryptocurrencies but go as high as 36%.

The DFPI has undertaken aggressive enforcement efforts against unregistered interest-bearing cryptocurrency accounts. These crypto interest accounts are securities and are subject to investor protections under the law, including adequate disclosure of the risk involved. Collectively, these actions protect investors while ensuring that California remains an ideal setting for responsible financial innovation.

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New York’s AG Sues Nexo For Offering Unregistered Securities.

The announcement by New York’s Attorney General Letitia James explains that Nexo received a prior warning and was ordered to either register its service with the state’s authority or withdraw it. Jones also explained that the crypto lender mislead investors by claiming to be in compliance with state laws.

Cryptocurrency platforms are not exceptional; they must register to operate just like other investment platforms. Nexo violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform. Nexo must stop its unlawful operations and take necessary action to protect its investors.

The complaint also demands Nexo pay restitutions to affected investors, disgorge itself of related profits, and permanently cease its violation of state law. The actions against this crypto lender are just the latest chapter in an attempt to regulate various crypto products as securities, in accord with the SEC’s current stance.

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Do you think Nexo’s Earn Interest Product accounts really fit the definition of securities? Let us know in the comments below.