Crypto Lender Nexo In Trouble For Alleged Sale Of Unregistered Securities

KEY POINTS

California's DFPI alleges Nexo has sold unregistered securities
New York AG Letitia James has called for a permanent ban on Nexo's activities
Nexo Founder Antoni Trenchev says the firm has "been working with federal and state regulators"

Several states have filed lawsuits against crypto lending platform Nexo for alleged illegal operations.

California's Department of Financial Protection and Innovation (DFPI) issued a cease and desist order against Nexo's crypto interest-bearing accounts Monday accusing it of facilitating the sale of unregistered securities. The regulator said Nexo's Earned Interest Product accounts are securities and "have been offered and sold without prior qualification, in violation of California Corporations Code section 25110."

"As of July 31, 2022, over 18,000 California residents have active Earn Interest Product flex- or fixed-term accounts; these accounts collectively hold investments totaling at least $174,800,000," the department said.

The DFPI has filed similar suits against crypto lending platforms BlockFi, Voyager and Celsius Network. Two of these firms, Voyager and Celsius Network, have filed for Chapter 11 bankruptcy as a bidding war between Binance and FTX is going on for the sale of the former's assets.

In another incident, New York Attorney General Letitia James filed a lawsuit against Nexo asking the court to permanently ban the firm from engaging in the sale of securities in the state.

"Nexo violated the law and investors' trust by falsely claiming that it is a licensed and registered platform. Nexo must stop its unlawful operations and take necessary action to protect its investors," James said.

Additionally, Vermont and Washington also issued cease and desist orders against the crypto platform. Other states that are suing the platform include Maryland, Oklahoma, South Carolina and Kentucky.

Interestingly, Nexo Founder Antoni Trenchev told The Block that the firm has "been working with U.S. federal and state regulators and understand their urge, given the current market turmoil and bankruptcies of companies offering similar products, to fulfill their mandates of investor protection by examining past behavior of providers of earn interest products."

International Business Times has reached out to Trenchev and is yet to receive a reply.