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Crypto Lender Nexo Hit With Enforcement Actions From Eight States

Crypto Lender Nexo Hit With Enforcement Actions From Eight States

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State securities regulators in California and several other states took action against Nexo Group, the parent company of cryptolender Nexo, on Monday, calling the company’s Earn interest product an unregistered security.

“These crypto interest accounts are securities and are subject to investor protections provided by law, including appropriate risk disclosure,” the California Department of Financial Protection and Innovation (DFPI) said in a statement. Press release.

DFPI’s release notes that Nexo’s interest rates of up to 36 percent are “significantly higher than those on short-term, investment-grade, fixed-income securities or bank savings accounts,” regulators wrote in the release.

Nexo CEO Antoni Trenchev said Decrypt in a text message that the company has been working with federal and state securities regulators to make its Earn Interest product compliant.

“Following the SEC’s guidance on earning products, dubbed ‘The BlockFi Order’ in February 2022, Nexo has voluntarily stopped connecting new US customers to our Earn Interest product, as well as discontinued the product to acquire new balances for existing customers,” Trenchev said. .

“Nexo is committed to finding a clear path forward for the regulated provision of products and services in the United States, preferably at the federal level,” said Trenchev. (Disclosure: Nexo is one 22 investors in Decrypt.)

The California joined the Securities Market Authority Vermont, Oklahoma, South Carolina, Kentucky, and Maryland in the process of filing cease-and-desist orders against the company. At the time of this writing Nexo licenses and registrations says the company is registered to operate in California, Oklahoma, South Carolina and Maryland.

The state of Washington, which had not yet issued its own abolition order, issued a payment notice. On Monday afternoon, New York State Attorney General Letitia James announced that the state would sue Nexo, among other charges, for “falsely representing that it was in compliance with applicable regulations and permitting requirements.”

In June, the crypto lending segment was in upheaval.

Celsius had frozen accountsVoyager Digital had filed a notice of default of insolvent hedge fund Three Arrows Capital, and BlockFi had secured the bailout contract CEO Sam Bankman-Friedin from FTX. At that time Nexo was fighting rumors it did not have the funds to cover all of its obligations to account holders. Since then, Celsius and Voyager Digital have filed for bankruptcy.

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