California, New York Join Several States Ordering Crypto Lender Nexo to Halt Yield Product

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.

UPDATE (Sept. 26, 2022, 19:09 UTC): Adds further comments from states.

UPDATE (Sept. 26, 2022, 20:01 UTC): Adds comment from Nexo.

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