California’s DFPI has issued a cease and desist order against Nexo as a result of its interest account.
By Ibukun Ogundare
Updated
3 mins read
The Department of Financial Protection and Innovation (DFPI) in California, New York, and six other US state regulators are suing crypto lending platform Nexo. The group of state regulators announced legal action against the crypto platform over its failure to register its interest account. In a press release, the DFPI revealed that it had joined other state securities regulators to bring action against Nexo in connection with its Earn Interest Product account.
According to the California DFPI, investors deposit crypto assets with Nexo using these accounts. And in exchange, they receive interest on the deposits. For this set of investors, Nexo offers up to 36% of annual interest rates on deposits. Significantly, the return is higher than short-term rates and rates on bank saving accounts. Thus, the California DFPI concluded that Nexo offered the Earn Interest Product account in the state without first determining these accounts as securities. If securities are registered, investors will have access to all required information. This information will aid their decision-making in opening crypto interest accounts. Also, the purpose of securities registration will help investors in weighing the risks ahead of them.
DFPI Commissioner Clothilde Hewlett explained that the Department is taking “aggressive enforcement efforts” concerning unregistered crypto accounts that deal with earn interest products.
“These crypto interest accounts are securities and are subject to investor protections under the law, including adequate disclosure of the risk involved. Collectively, these actions protect investors while ensuring that California remains an ideal setting for responsible financial innovation.”
Furthermore, the DFPI noted that the action against Nexo in California is a fragment of a bigger move. The Department is investigating companies that offer crypto interest accounts. Ahead of Nexo, BlockFi Lending LLC, Celsius Network, and Voyager Digital have had their own share of the investigation.
California’s DFPI has issued a cease and desist order against Nexo as a result of its interest account. The document stated that the Earned Interest Product accounts by Nexo are securities. The regulator added that the crypto platform offered and sold the accounts with no prior qualification. Hence, violating California Corporations Code.
“Since at least June 2020, Nexo Capital Inc., on behalf of 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.”
The cease and desist order shows that more than 18,000 California residents have active Nexo Earn Interest product accounts as of 31st July. The accounts are either flex- or fixed-term, and they collectively hold a minimum of $174,800,000.
Separately, New York Attorney General Letitia James announced Nexo’s violations in New York. The attorney wrote that the platform falsely claimed to be licensed and registered.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.
