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California files order against Nexo interest account, says it’s 8th state to take action

California files order against Nexo interest account, says it’s 8th state to take action

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The California Department of Financial Protection & Innovation (DFPI) has filed a cease and desist order against crypto lending platform Nexo as part of its ongoing investigation into companies that offer interest-bearing crypto savings accounts. The agency says it will join regulators in seven other American states in taking action against the company. Other states include Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont, according to CNBC.

DFPI claimed in the application that the interest product Nexo was earning was an unconditional security, i.e. a security that the state has not approved for sale in the form of an investment contract. The product had offered up to 36% annual interest.

The product has not been available to new users in the US since February 19, and existing US account holders were unable to make new deposits to their accounts following the $100 million fine imposed on BlockFi by the Securities and Exchange Commission. after it discovered that the BlockFi Interest account was an unregistered security. However, the DFPI filing alleges that Nexo account holders with automatic renewal were still receiving interest payments.

Related: In the midst of crypto winter, Nexo commits an additional $50 million to a buyback program

The DFPI announced in July that it would begin investigating companies that offered so-called crypto-interest accounts. In a statement announcing the action against Nexo, DFPI Commissioner Clothilde Hewlett said:

“These crypto interest accounts are securities and are subject to investor protections under the law, including appropriate risk disclosure.”

DFPI issued a consent order against Celsius Network on 8 in August, alleging that the company and its CEO Alex Mashinsky made misrepresentations and omissions in the crypto interest accounts it offered. Celsius filed for bankruptcy on July 14.

DFPI also filed a cease and desist order against Voyager Digital on 3 June, about a month before the company filed for bankruptcy. California Gov. Gavin Newsom vetoed legislation to establish the state’s licensing and regulatory framework for digital resources on Sept. 23, calling the move “preemptive.”