Nexo Crypto lender is facing problems from state authorities in California, New York and Washington. The enforcement actions from multiple state securities regulators detail that Nexo’s Earn Interest Product (EIP) may be in violation of securities laws.
Nexo Targeted by Several Securities Regulators Over the Crypto Lender’s Earn Interest Product
Following the issues that took place last year against Celsius’ and Blockfi’s interest-bearing accounts, the crypto lender Nexo has been targeted by several state securities regulators concerning the company’s Earn Interest Product (EIP). The state of California insists that since June 2020, Nexo has “offered and sold unqualified securities, in the form of Earn Interest Product accounts, to the United States public at large and to California residents.”
Letitia James, attorney general of New York, filed a lawsuit against Nexo. James, along with the state of New York filed a lawsuit against Nexo. James claims that Nexo offered EIPs from June 2020 to the present. James claims Nexo violates New York’s Martin Act, and acted as “unregistered securities brokers or dealers.” Washington is saying the same and Washington’s securities division mentioned several states are in on the law enforcement actions together.
Kentucky, Vermont, South Carolina, and Maryland have all filed similar actions against Nexo, and many of the complaints are ordering Nexo to cease and desist current operations tied to the firm’s interest-bearing accounts. Before the bankruptcy of Celsius, similar law enforcement actions were taken in 2021. Blockfi also was targeted in 2021 by various state securities regulators. In February 2022 Blockfi received a charge from the U.S. Securities and Exchange Commission.
Blockfi agreed to settlement with the SEC. They paid $100 millions in penalties. Crypto lenders have had significant issues this year, and when rumors circulated that Celsius was insolvent, Nexo offered to purchase the company’s assets. Blockfi explained that it had zero exposure to Celsius but when Celsius paused withdrawals, the move caused a significant “uptick in client withdrawals” on the Blockfi platform.
Blockfi did, however, have exposure to the now-defunct crypto hedge fund Three Arrows Capital (3AC) and Blockfi’s CEO said the firm lost $80 million from the bankrupt company. Nexo tweeted on September 26th, but no statement has been issued by the crypto lender about cease-and-desist orders from securities regulators. The NFT lending desk had an event three days earlier. ask-me-anything (AMA) session featuring the co-founder of Nexo and the firm’s managing partner.
Let us know your thoughts on the eight regulators who targeted Nexo Monday. Please comment below to let us know your thoughts on this topic.
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