Cryptocurrency lender Nexo is facing charges from eight US states.

Switzerland-based crypto lender Nexo is facing concurrent enforcement actions from eight different US states with varying fees. Actions include cease and desist orders, administrative measures, etc.

State regulators in California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington, and Vermont stated that Nexo allegedly failed to register a "Profit Product" as a security and make it available to customers as interest-bearing accounts. . 

Details of actions taken

The California Department of Financial Innovation and Protection (DFPI) issued a cease and desist order and released a statement regarding it. “These crypto interest accounts are securities and are subject to investor protections under the law, including proper disclosure of the risk involved,” said DFPI Commissioner Clothilde Hewlett.

The statement also notes that Nexo offers significantly high interest rates to investors with the product in question, sometimes as high as 36%.

The state of Virginia issued a cease and desist order, citing a lack of protection from the Securities Investor Protection Corporation (SIPC). The order also notes that the product in question is not insured by the Federal Deposit Insurance Corporation (FDIC).

Oklahoma and Kentucky joined California and Virginia in issuing cease and desist orders. Washington State has yet to issue a cease-and-desist order, but it has released an allegation statement detailing all of the alleged misconduct.

New York, Maryland and South Carolina have yet to issue shutdown and cancellation orders, however they have issued notices with similar allegations. New York has brought a special action alleging Nexo misrepresented its registration status. 

The lawsuit filed by New York Attorney General Letitia James reveals that the state seeks to completely ban Nexo from operating in New York.

“Nexo violated the law and investor trust by falsely claiming to be a licensed and registered platform. Nexo must stop its illegal activities and take the necessary steps to protect its investors,” said AG James.

“Nexo is committed to finding a clear path for the delivery of regulated products and services in the United States, ideally at the federal level,” NEXO CEO Antoni Trenchev said in a statement. Father.

Earlier this year, Nexo clarified that it had "voluntarily stopped referring new US customers to our Profitable Products, as well as discontinuing the product to take new balances to existing customers." The move comes after the SEC voiced its stance on interest-bearing accounts, amid a $100 million settlement with crypto lender BlockFi.

The crypto industry is seeing a new campaign by regulators to crack down on crypto products. In the past, such actions could be attributed to calls for stricter regulations following Terra's demise and the subsequent $2 billion valuation loss.

However, the upcoming midterm elections may be to blame for the recent crackdown. 

Sep 28, 2022