by Another crypto lending firm has been caught under the fire of regulators. CNBC published an article where it was announced that eight states said on Monday that they would bring up action against Nexo, the crypto lending firm, for allegedly offering a product to users and promising interests without being duly registering it as a security.
Earning Interests Under Cover
The product offered by Nexo known as Earn-Interest-Product lets investors transfer their assets to Nexo’s platform and get rewarded with an interest of up to 36% per annum. The eight having an axe to grind Nexo include Kentucky, Oklahoma, Vermont, South Carolina, Washington, New York, and California. The regulators in these states say Nexo provided accounts while it did not register them as securities, and did not disclose all details to customers.
The regulators said further that Nexo misrepresented itself to customers, claiming to be a regulated and licensed platform. The regulators in Vermont added in their filing that Nexo investors don’t have a part in the selection, reviewing, or monitoring of the activities that Nexo engages in to generate earnings that bring their interests.
A lot of investors use accounts that promise interests. Vermont said residents of the state have invested over $800 million into those accounts, meanwhile, over 93,000 investors have been affected.
In New York, the Attorney General has responded to the state’s suit against Nexo. She stated in her report that crypto platforms are not an exception. They have to be registered before they operate like every other investment platform.
Company Perspective
The Attorney General stated that Nexo has gone against the law and the trust of its investors by claiming to be a licensed platform. Nexo has to stop its illegal operation and do what it must in order to protect those who invested with it, she said.
Nexo has sought to show that it does not follow the path of other cryptocurrency lending platforms and that it is right for investors to do business with. The firm released a statement where it said it is working with federal and state level regulators in the US while it understands their position because of the market’s instabilities.
The bankruptcy of other firms that offered similar products put regulators on the edge. And they want to exercise customer protection mandates by examining every kind of service provider, the statement said.
The statement continued that the past few months have clearly shown that Nexo is a different earn-interest service provider. This was made evident in the fact that it did not carry out uncollateralized loan deals, it had no form of exposure to or business with LUNA, and it did not require a bailout, or need to restrict customers from withdrawing.
