Eight U.S. state regulators on Monday charged cryptocurrency lender Nexo Group for allegedly failing to register its Earn Interest Product, as authorities crackdown on digital asset platforms rocked by a crypto winter in recent months.
Regulators from New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont all filed administrative actions against the company, saying its accounts would qualify as securities and should be registered as such.
In February, BlockFi had agreed to pay $100 million in a landmark settlement with the U.S. Securities and Exchange Commission and state authorities that said its interest-bearing product qualifies as a security and should have been registered.
Since then, digital asset platforms have been seeking more clarity on the rules governing such products, saying current regulations remain unclear.
"Since the SEC guidance on earn products in February 2022, Nexo has voluntarily ceased the onboarding of new U.S. clients for our Earn Interest Product as well as stopped the product for new balances for existing clients," the company said in an emailed statement.
Nexo's interest accounts offered under the product promise an annual interest rate as high as 36%, according to California's Department of Financial Protection and Innovation.
"Nexo violated the law and investors' trust by falsely claiming it is a licensed and registered platform," New York Attorney General Letitia James said, adding she had sued the company and was seeking "disgorgement of any revenues derived from Nexo's unlawful conduct".
The regulatory clampdown comes in the midst of a crypto winter that has seen crypto prices have plummet this year as a risk-off sentiment and fears of a looming recession crushed risky assets, forcing some companies into bankruptcy.
(Reporting by Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)