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.”
After the Securities and Exchange Commission made its view clear on interest-bearing accounts early this year, Switzerland-based Nexo said it had "voluntarily ceased the onboarding of new US clients for our Earn Interest Product as well as stopped the product for new balances for existing clients," according to a statement sent to CoinDesk on Monday. "Nexo is committed to finding a clear path forward for the regulated provision of products and services in the US, ideally on a federal level."
The states – also including Washington, Maryland, Kentucky, Oklahoma, South Carolina and Vermont – filed individual actions targeting certain yield-producing accounts at Nexo. The lender advertises the accounts as "high-yield," and California noted the company offered annual interest rates as high as 36%.
“These crypto interest accounts are securities and are subject to investor protections under the law, including adequate disclosure of the risk involved,” said Clothilde Hewlett, commissioner of California’s Department of Financial Protection and Innovation. California claimed that as of July 31, more than 18,000 of its residents had $175 million in such accounts.
Crypto firms BlockFi, Voyager Digital and Celsius Network Inc. have been subjected to similar regulatory actions. While BlockFi resolved state and federal actions with a $100 million settlement, lenders Voyager and Celsius have been immersed in bankruptcy, with Celsius shareholders filing last week to secure a share of the firm’s remaining assets.
UPDATE (Sept. 26, 2022, 19:09 UTC): Adds further comments from states.
UPDATE (Sept. 26, 2022, 20:01 UTC): Adds comment from Nexo.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.