California, New York Join Several States Ordering Crypto Lender Nexo to Halt Yield Product

California, New York and six other states are suing cryptocurrency lending platform Nexo for offering unregistered securities in the form of accounts that pay interest for cryptocurrency deposits, the states said in statements on Monday.

New York's action specifically accused Nexo Inc. of misrepresenting its registration status.

“Nexo violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform," said New York Attorney General Letitia James, who is demanding the company give up the revenue from its product and provide restitution to customers. "Nexo must stop its unlawful operations and take necessary action to protect its investors.”

Switzerland-based Nexo hasn't yet issued a comment in response to the state actions.

The states -- also including Washington, Maryland, Kentucky, Oklahoma, South Carolina and Vermont -- filed individual actions targeting Nexo's "Earn Interest Product" accounts. Nexo advertises the accounts as "high-yield," and California noted the company offered annual interest rates as high as 36%.

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

Crypto firms BlockFi, Voyager Digital and Celsius Network Inc. have been subjected to similar regulatory actions.

UPDATE (Sept. 26, 2022, 19:09 UTC): Adds further comments from states