Several State Financial Regulators Allege Crypto Lending Platform Nexo Violates Securities Laws

Cryptocurrency lender Nexo is facing regulatory action in eight US states for allegedly offering an investment product that violates securities laws.

State regulators in California, New York, Washington, Kentucky, Vermont, Caroline from the south, Maryland and Oklahoma issue statements focused on Nexo’s Earn Interest Product (EIP).

The Office of South Carolina Attorney General Alan Wilson said the regulatory actions are the result of a “task force of state securities regulators” targeting interest-bearing cryptocurrency accounts.

“The division alleges that Nexo violated South Carolina securities law by offering and selling unregistered or unqualified securities in the form of its EIP accounts and that Nexo and its co-founders misrepresented and omitted material facts regarding EIP accounts.”

The discontinuance and abstention order issued by Clothilde V. Hewlitt, Commissioner of the California Department of Financial Protection and Innovation said Nexo failed to save the account as security.

“The Commissioner is of the opinion that the interest product accounts offered and sold by the Nexo Group, Nexo Inc. and Nexo Capital Inc. are securities, in the form of investment contracts, under Article 25019 of the California Corporations Code… and were offered and sold without prior qualification, in violation of Section 25110 of the California Corporations Code.

Prior to cracking down on Nexo, several state regulators also filed lawsuits against struggling crypto lender Celsius Network.

Regulators in Alabama, Kentucky, New Jersey, Texas and Washington probe in the company after withdrawals stopped in June.

The California Financial Services Regulator has also Posted a forbearance order against the company, alleging that its Earn Rewards accounts offered unregistered titles. The Vermont financial regulator also accuses the company of making false complaints on its compliance with securities laws.

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