Nexo Hit With Eight Cease-and-desist Orders

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  • Nexo has been hit with eight separate cease-and-desist orders
  • Eight states have criticised Nexo for allowing U.S. users to open interest-earning accounts
  • Nexo also claimed to be a registered and licensed platform, which it isn’t

Crypto lending platform Nexo has been hit with eight simultaneous cease and desist orders in the U.S., with regulators saying the company is not allowed to operate its Earn Interest Product until attains clearance to do so. The eight states taking the action also allege that Nexo misrepresented the nature of the accounts and suggested to investors that it is a licensed and registered platform, of which it is neither.

Earn Interest Product Lands Nexo in Hot Water

Nexo has typically been seen as one of the more sensible lending platforms, not getting tied up in the ‘crypto contagion’ that has brought so many other lending platforms down. However, it seems that its very operation may have cost it dear, with its Earn Interest Product product coming under the spotlight from the eight states – California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont.

The Vermont order states that as of July 31st this year, more than 93,000 U.S. residents had invested more than $800 million in Nexo’s various interest-earning accounts, while New York’s Attorney General Letitia James claimed that Nexo “violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform”, adding that it “must stop its unlawful operations and take necessary action to protect its investors.”

Nexo actually prevented U.S. customers from opening Earn Interest Product accounts in February this year if they didn’t already have an existing Nexo account, but the new filings prevent all U.S. customers from opening them.

“Very Different Provider”

Nexo’s response was to point out that it 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.” This, however, has no bearing on the Earn Interest Product accounts, stating only that it has been “working with U.S. federal and state regulators” to make its products legal.

It seems, however, that somewhere along the line there has been a miscommunication about what is legal and what’s not, which will probably lead to a fine and the permanent withdrawal of Earn Interest Products from sale to U.S. residents.