State securities regulators in California and several other states took action Monday against Nexo Group, the parent company of cryptocurrency lender Nexo, saying its “Earn Interest Product” is an unregistered security.
“ These cryptocurrency interest accounts are securities and must be subject to investor protections under the law, such as appropriate disclosure of the risks involved,” the California Department of Financial Protection and Innovation (DFPI) said in a press release .
The DFPI announcement mentioned Nexo’s interest rate as high as 36%, ” significantly higher than interest rates on short-term, investment-grade, fixed-income securities or bank savings accounts ,” the authority said in a press release .
Antoni Trenchev, CEO of Nexo, told the media via a text message that the company continues to work with federal and state securities regulators to make its Earn Interest products interest-earning products compliant. He stated:
Since February 2022, when the Securities and Exchange Commission (SEC) introduced guidelines for earning products known as “The BlockFi Order”, Nexo has voluntarily stopped getting new U.S. customers for our Earn Interest Product products, Also stop offering this product to new accounts of existing customers.
Antoni Trenchev said, “ Nexo is committed to finding a clear path forward , ideally at the federal level.”
In addition to California securities regulators, Vermont, Oklahoma, South Carolina, Kentucky and Maryland have all issued injunctions against Nexo Group. At press time, Nexo’s licenses and registrations showed the company was registered to operate in California, Oklahoma, South Carolina and Maryland.
As for Washington State, although it has not yet filed an injunction against Nexo Group itself, it has issued a statement of prosecution. New York State Attorney General Letitia James announced Monday afternoon that the state is indicting Nexo, alleging that Nexo ” misrepresented that the company complied with applicable regulations and licensing requirements.”
In June of this year, major events took place in the cryptocurrency lending space. Lending platform Celsius froze its accounts, Voyager Digital filed a notice of default on insolvent hedge fund Three Arrows Capital, and BlockFi received a bailout from Sam Bankman-Fried , founder and CEO of cryptocurrency exchange FTX .
At the time, Nexo was fighting rumours . Since then, Celsius and Voyager Digital have filed for bankruptcy one after another.
