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Cryptocurrency lender Nexo has come under fire from California regulators and seven other US state securities watchdogs for its unregistered crypto interest account program, which the authorities classified as securities.
Notably, some crypto lenders offering similar programs in the United States faced similar actions in the past from US regulators.
California Slams Desist and Refrain Order Against Nexo
In a statement published on Monday (September 26, 2022), Californiaâs Department of Financial Protection and Innovation (DFPI) announced that Nexoâs Earn Interest Product account, with annual interest rates as high as 36%, was offered to California residents without being registered as securities.
According to a desist and refrain order filing, the DFPI claimed that while Nexo claimed to have stopped serving the product to US investors since February 19, 2022, clients were still able to use the interest-bearing cryptocurrency account using the lenderâs automatic renewal feature.
Furthermore, the California regulator alleged that more than 18,000 residents in the state were actively using the Earn Interest Product as of July 31, 2022. The DFPI earlier said the agency is conducting an active investigation into companies offering crypto interest accounts.
Commenting on the latest development, Clothilde Hewlett, DFPI Commissioner, said:
âThe 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.â
The California agency carried out similar actions against other crypto lenders such as Celsius, BlockFi, and Voyager Digital. While BlockFi paid a penalty fee of $100 million to the US Securities and Exchange Commission (SEC) and 32 other states, Celsius and Voyager recently filed for Chapter 11 bankruptcy.
New York Sues Nexo
New York Attorney General Letitia James also filed a lawsuit against Nexo, alleging that the crypto lender âmisrepresented to investors that they are a licensed and registered platform.â
Attorney General James is seeking ârestitution for thousands of defrauded investors, disgorgement of revenues derived from Nexoâs unlawful conduct, and permanent injunctions against the defendantsâ violations of state law.â About 10,000 New York residents held accounts with the crypto lender, according to the NY Attorney General.
In addition to California and New York, six other state securities regulators from South Carolina, Kentucky, Vermont, Maryland, Oklahoma, and Washington took action against Nexo.
The post California Regulators Order Nexo to Stop Crypto Interest Accounts appeared first on CryptoPotato.
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