Eight states file lawsuits against Nexo’s crypto-lending platform
New York State Attorney Letitia James speaks at a press conference after former US President Donald Trump’s White House chief strategist Steve Bannon arrived to surrender, in New York, the United States, on September 8, 2022.
Caitlin Ochs | Reuters
Eight states announced on Monday that they are suing crypto-lending platform Nexo Group over its unregistered interest-bearing cryptocurrency product.
State regulators in California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont allege that Nexo offered customers interest-earning accounts without first registering them as securities and providing required disclosures. Without access to these financial statements, state regulators say investors could not make informed investment decisions.
The filings also state that Nexo misrepresented to investors that it is a licensed and registered platform.
These interest-earning accounts, known as “Earn Interest Product”, allowed investors to deposit assets with Nexo in exchange for earning as high as 36% on their deposits.
Nexo’s terms and conditions said the company had the ability to distribute customer funds at its sole and absolute discretion.
According to the order filed in Vermont, “Investors have no part in selecting, monitoring or reviewing the income-generating activities that respondents use to serve this interest.”
The Vermont order states that as of July 31, 2022, more than 93,318 U.S. residents had more than $800 million invested in these accounts.
In response to more than 10,000 of its citizens being affected, the New York Attorney General filed a lawsuit against the cryptocurrency platform.
“Cryptocurrency platforms are not exceptional; they must register to operate just like other investment platforms,” said New York Attorney General Letitia James. “Nexo violated the law and investors’ trust by falsely claiming to be a licensed and registered platform. Nexo must stop its illegal operations and take the necessary measures to protect its investors.”
In February, Nexo prevented US investors who had not yet opened a Nexo account from investing in the Earn Interest product or adding additional cryptocurrency to their accounts. The order statements entered prevent Nexo from offering this product to residents until it meets the necessary registration requirements.
