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Eight states pointed enforcement actions against the crypto medium known as Nexo

Eight states pointed enforcement actions against the crypto medium known as Nexo

September 28, 2022: -On Monday, Eight states reported that they’re bringing actions against the crypto-lending platform Nexo Group to connect with its unregistered, interested cryptocurrency product.

State regulators in California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington, and Vermont allege Nexo providing customers interest-earning accounts without registering them as securities and providing necessary disclosures. State regulators contend that without access to these financial statements, investors cannot make known investment decisions.

The filings alleged that Nexo misrepresented the accounts and suggested that it is a licensed and registered platform for investors. According to one of the filings, these interest-earning accounts, called as “Earn Interest Product,” allowed investors to deposit assets with Nexo in exchange for earning yields of almost 36% on their deposits.

However, Nexo says only one asset earns an interest rate of 36% and does not advertise that yield in its marketing materials. The company says some of its most famous assets, such as Bitcoin, only earn results in single-digit percentages.

The crackdown comes as a handful of recent crypto bankruptcies this year have left investors without access to their funds. Celsius, which offered similar interest-bearing accounts, filed for bankruptcy this summer following freezing customer funds in June. A third firm, Voyager, filed for Chapter 11 bankruptcy in July. The industry is seeing billions of dollars wiped out during the weeks surrounding the implosion of cryptocurrency Terra USD and the failure of crypto hedge fund Three Arrows Capital.

Nexo’s terms and conditions said the company could deploy customer assets at its “sole and absolute discretion.”

According to the order filed in Vermont, “investors have no part in selecting, monitoring, or reviewing the revenue-generating activities that Respondents utilize to earn this interest.”

The Vermont order states that as of July 31, 2022, more than 93,318 U.S. residents had invested over $800 million in these accounts.

In response to over 10,000 of its residents being affected, New York’s Attorney General Letitia James filed a lawsuit against the cryptocurrency platform.

“Cryptocurrency platforms are not exceptional; they must register to operate such as other investment platforms,” James added in a statement. “Nexo violated the law and investors’ trust by falsely claiming it is a licensed and registered platform. Nexo is stopping its unlawful operations and take necessary action to protect its investors.”

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