- Similar lawsuits have been filed against Nexo in Kentucky, Vermont, South Carolina, and Maryland.
- Similar law enforcement actions were taken against Celsius in 2021.
On Monday, state securities regulators in California and several other states took action against the crypto lender Nexo, labeling the company’s Earn Interest Product (EIP) unregistered security.
The state of California claims that Nexo has offered and sold unqualified securities in the form of Earn Interest Product accounts to the general public in the United States and California residents since June 2020. Nexo was sued by the state of New York and its attorney general, Letitia James. Similarly, the state of New York and James claim that Nexo began offering EIPs in June 2020 and has continued to do so to the present.
Unregistered Security Dealings
According to James, Nexo violated New York’s Martin Act by acting as unregistered securities brokers or dealers. Washington is saying the same thing, and Washington’s securities division has stated that several states are cooperating with law enforcement. Similar complaints have been filed against Nexo by regulators in Kentucky, Vermont, South Carolina, and Maryland, with many of the complaints ordering Nexo to cease current operations related to the firm’s interest-bearing accounts.
Similar law enforcement actions were taken against Celsius in 2021 before the company went bankrupt. Crypto exchange BlockFi was fined $100 million by the SEC after the regulator determined that its BlockFi Interest Accounts were unregistered securities and that the company was not properly registered to provide investment services.
Celsius had frozen accounts, Voyager Digital had served a default notice on insolvent hedge fund Three Arrows Capital, and BlockFi had secured a bailout deal from FTX, which was run by CEO Sam Bankman-Fried. Nexo was fighting rumors at the time that it didn’t have enough money to cover all of its obligations to account holders. Celsius and Voyager Digital have since declared bankruptcy.