Eight US states sue crypto lender Nexo

The plaintiffs demand that the company stop providing an interest payment service for crypto deposits

27.09.2022 - 08:15

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What’s new? Eight US states, including New York and California, have accused crypto lending company Nexo of offering unregistered securities in the form of accounts that pay interest for cryptocurrency deposits. In the lawsuit, New York Attorney General Letitia James notes that Nexo misled investors with false claims that it was a licensed and registered platform. The prosecutor is demanding that the company stop providing the service as well as reimburse the funds to customers.

Lawsuit against Nexo

More details about the situation. The states that filed separate lawsuits against certain Nexo products also include Washington, Maryland, Kentucky, Oklahoma, South Carolina, and Vermont. Representatives from California noted that the lender advertises its interest-bearing accounts as high-yield and offers annual interest rates of up to 36%. They also added that as of July 31, more than 18 000 state residents had deposited a combined $175 million in such accounts.

“These crypto interest accounts are securities and are subject to investor protections under the law, including adequate disclosure of the risk involved,” noted Clothilde Hewlett, commissioner of California’s Department of Financial Protection and Innovation.

What is known about Nexo? It is a blockchain-based platform that offers loans in fiat and stablecoins against cryptocurrencies such as BTC, ETH, LTC, or XRP. In April 2022, the company teamed up with Mastercard to launch the world's first cryptocurrency-backed payment card.

In July, the company reported the purchase of Vauld, a blockchain platform that previously froze customer funds. The two parties signed an agreement with a plan to acquire up to 100% of the company’s shares. Nexo co-founder Antoni Trenchev noted that the company could restructure or refinance Vauld, depending on how the company’s due diligence goes.

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