California, New York, and Six other US states have slapped crypto lender Nexo with a suit for offering unregistered securities in the form of accounts that pay interest for cryptocurrency deposits.
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California Regulators Slapped Nexo With Cease and Desist Notice
The California financial watchdog has issued a cease and desist order against Nexo, a crypto lending firm for offering yield-bearing accounts.
In the filing, Nexo Group offered the Earn Interest Product with returns of up to 36% without informing clients that the associate accounts are securities. Also in the filing is the accusations that Nexo misled its customers that it operated a registered and licensed platform.
“The 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,” said DFPI Commissioner Clothilde Hewlett in an official statement.
According to the DFPI order, Nexo offers flex-term and fixed-term interest-bearing accounts that offer interest of 36% and over, depending on the investor’s loyalty tier, amongst other things.
In response to this suit, Nexo said it has stopped offering its Earn Interest products to the people of the United States and suspended deposits into US accounts since February this year. DFPI however, said that some of the customers with fixed-term Earn Interest whose term ended before suspending deposit in February renewed their account for another term, this however neutralized Nexo’s statement.
More States Regulators Sue Nexo Group
States regulators of Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington, and Vermont, have also alleged that Nexo did not provide customers access to appropriate disclosures, which in turn prevented customers from making sound investment decisions.
New York’s action specifically accused Nexo of misrepresenting its registration status.
“Nexo violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform,” said New York Attorney General Letitia James, who is demanding the company give up the revenue from its “Earn Interest Product” accounts and provide restitution to customers. “Nexo must stop its unlawful operations and take necessary action to protect its investors.”
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