According to the complaint filed by New York Attorney General Letitia James, Nexo is “falsely asserting” that it conforms with the state’s securities laws.
On Monday, California and a number of other state securities authorities launched action against Nexo Group, the parent company of cryptocurrency lender Nexo, claiming that the business’s Earn Interest Product was an unregistered security.
According to a news release from the California Department of Financial Protection and Innovation (DFPI), “These crypto interest accounts are securities and are subject to investor protections under the law, including proper disclosure of the risk involved.”
Nexo’s interest rates, which may reach 36%, are noted in the DFPI statement as being “much higher than the rate on short-term, investment-grade, fixed-income securities or bank savings accounts,” according to authorities.
In a text message to Decrypt, Nexo CEO Antoni Trenchev stated that the business has been collaborating with state and federal securities regulators to make its Earn Interest products legal.
“Nexo has voluntarily suspended the onboarding of new US clients for our Earn Interest Product as well as discontinued the product for new balances for current clients,” Trenchev wrote. “This comes in response to the SEC guidelines on earn products, nicknamed “The BlockFi Order” in February 2022.
Vermont, Oklahoma, South Carolina, Kentucky, and Maryland also filed cease-and-desist orders against the corporation alongside the California Securities Commission. According to Nexo’s Licenses and Registrations, the business is currently authorized to conduct business in California, Oklahoma, South Carolina, and Maryland.
Washington State issued a statement of accusations but had not yet submitted its own cease-and-desist order. The state of New York is suing Nexo, among other things, for “falsely stating that it conforms with applicable rules and licensing requirements,” according to Letitia James, the attorney general of New York State, who made the announcement on Monday afternoon.
Insolvent hedge fund Three Arrows Capital’s accounts had been blocked by Celsius, while CEO Sam Bankman-FTX Fried had agreed to bail out BlockFi after Voyager Digital had sent a default notice on it. Nexo was fending off claims that it lacked the resources to meet all of its responsibilities to account holders at the time. Since then, bankruptcy petitions have been filed by Celsius and Voyager Digital.
