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New York State Attorney General Letitia James speaks at a press conference after former President Donald Trump’s White House Chief Strategist Steve Bannon arrives to surrender in New York, USA on September 8, 2022.
Caitlin Ox | Reuters
On Monday, eight states announced lawsuits against crypto lending platform Nexo Group over unregistered interest-bearing cryptocurrency products.
California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington, and Vermont Nexo alleges that it offered interest-bearing accounts to its customers without first registering it as a security and providing the required disclosures. Without access to these financial statements, state regulators say investors cannot make well-informed investment decisions.
The filing also alleges that Nexo misrepresented the accounts, suggesting to investors that Nexo was a licensed and registered platform. Known as the Earn Interest Product, these interest-earning accounts allowed investors to earn up to 36% yield on their deposits instead of depositing their assets in his Nexo.
The crackdown comes after several recent crypto bankruptcies this year have left investors unable to access their funds. Celsius, which offered similar interest-bearing accounts, filed for bankruptcy this summer after freezing customer funds in June. Voyager filed for Chapter 11 bankruptcy protection in July.The industry is using the cryptocurrency Terra USD and The collapse of Three Arrows Capital, a cryptocurrency hedge fund.
Nexo’s terms of service stated that the company had the ability to deploy its customers’ assets “in its sole and absolute discretion.”
According to the order filed in Vermont, “Investors are not involved in selecting, monitoring, or reviewing the revenue-generating activities that respondents utilize to earn this benefit.”
Vermont’s order states that as of July 31, 2022, more than 93,318 US residents have invested more than $800 million in these accounts.
The New York Attorney General has filed a lawsuit against the cryptocurrency platform after more than 10,000 residents have been affected.
Cryptocurrency platforms are no exception. They must be registered to operate like any other investment platform, said New York State Attorney General Letitia James. Nexo violated the law and investor confidence by falsely claiming to be a licensed and registered platform. We must take the necessary measures.
In February, Nexo blocked US investors who had not yet opened a Nexo account from investing in interest-earning products or adding cryptocurrencies to their accounts. The order filed further prevents Nexo from offering this product to residents until it meets the necessary registration requirements.
In its statement, Nexo sought to differentiate itself from other platforms that have faced financial troubles this year.
“We are working with federal and state regulators in the United States to investigate the past behavior of providers of revenue products in light of the current market turmoil and bankruptcies of companies offering similar products. By doing so, we understand their urge to meet their investor protection obligations,” the company said. said in a statement. As has been clearly emphasized in recent months, Nexo did not engage in unsecured loans, had no exposure to LUNA/UST and did not need to be bailed out. A very different provider of the product or had to resort to withdrawal restrictions.”
