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Yet another crypto lending platform, in the form of Nexo, has come under regulatory fire. Eight U.S. states file lawsuits accusing the lender of offering non-registered securities.
According to an article published by CNBC, it was announced by all eight states on Monday that they would be bringing enforcement action against crypto lending platform Nexo for offering an interest bearing crypto product without registering it first as a security.
The offering, which was known as “Earn Interest Product”, allowed Nexo investors to move their assets to its platform and earn as much as 36% in yield on the assets.
The regulators of the eight states which included; California, Kentucky, New York, Oklahoma, Washington, Vermont, and South Carolina, claimed that Nexo offered the accounts without them being registered as securities, and without disclosing properly to customers.
The state regulators also allege that Nexo misrepresents that it is a licensed and regulated platform to customers. In Vermont, the regulator filed that:
“investors have no part in selecting, monitoring, or reviewing the revenue-generating activities that Respondents utilise to earn this interest.”
Many investors are currently using the interest bearing accounts. Vermont stated that its residents had invested more than $800 million in the accounts, and that more than 93,000 of them were affected.
New York Attorney General Letitia James stated in response to her state’s lawsuit against Nexo that:
“Cryptocurrency platforms are not exceptional; they must register to operate just like other investment platforms. 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.”
In its defence, Nexo sought to demonstrate that it wasn’t following the same path as other crypto lending platforms, and that it was a sound platform for investors. A statement from the company said:
“We have 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,”
The statement continued:
“As the recent months have clearly underlined, Nexo is a very different provider of earn interest products, as showcased by the fact that it did not engage in uncollateralized loans, had no exposure to LUNA/UST, did not have to be bailed out, or needed to resort to any withdrawal restrictions.”
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