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Crypto lender Nexo has issues with state governments from California, New York, Washington, Kentucky, Vermont, South Carolina and Maryland. The enforcement actions by several state securities regulators indicate that Nexo’s Earn Interest Product (EIP) may be in violation of securities laws.
Following the issuances that took place last year against Celsius and Blockfi’s interest-bearing accounts, crypto lender Nexo has been targeted by several state securities regulators regarding the company’s Earn Interest Product (EIP). The state of California insists that since June 2020, Nexo has “offered and sold non-qualified securities, in the form of earning interest product accounts, to the general public of the United States and to residents of California.”
The State of New York and Attorney General Letitia James filed a lawsuit against Nexo. Similarly, New York State and James say Nexo began offering the EIPs around June 2020, until today. James claims Nexo is violating New York’s Martin Act, acting as “unregistered securities brokers or dealers.” Washington says the same, and the Washington Securities and Exchange Department mentioned that several states are joining the law enforcement actions together.
Kentucky, Vermont, South Carolina and Maryland have all filed similar lawsuits against Nexo, and many of the complaints order Nexo to cease and desist from current operations related to the firm’s interest-bearing accounts. Similar law enforcement actions took place in 2021 against Celsius before the company went bankrupt. Blockfi was also targeted by several state securities regulators in 2021, and in February 2022, Blockfi was charged by the US Securities and Exchange Commission (SEC).
Blockfi decided to settle with the SEC and paid $100 million in fines. Crypto lenders have had significant problems this year, and when Celsius was rumored to be insolvent, Nexo offered to buy the company’s assets. Blockfi explained that it had zero exposure to Celsius, but when Celsius stopped withdrawals, the move caused a significant “surge in client withdrawals” on the Blockfi platform.
However, Blockfi had exposure to now-defunct crypto hedge fund Three Arrows Capital (3AC), and Blockfi’s CEO said the firm lost $80 million from the bankrupt company. Nexo has tweeted on September 26, but the crypto lender has not issued a statement regarding securities regulators issuing cease and desist orders. Three days ago, the NFT’s lending counter held one ask-me-anything (AMA) session with the co-founder of Nexo and the firm’s managing partner.
What do you think of the eight regulators who targeted Nexo on Monday? Let us know what you think about this topic in the comments section below.
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