New York, California sue crypto lender Nexo over interest account registration

Cryptocurrency lender Nexo Group has been sued by authorities in New York and California for allegedly failing to register its Earn Interest Product, as U.S. regulators crackdown on digital asset platforms rocked by a crypto winter in recent months.

The lawsuits were filed separately by New York Attorney General Letitia James and the California Department of Financial Protection and Innovation (DFPI), according to statements on Monday.

Earlier this year, 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.

Nexo’s interest accounts offered under the product promise an annual interest rate as high as 36%, the DFPI said.

Both regulators said the accounts would qualify as securities and should be registered as such.

“Nexo violated the law and investors’ trust by falsely claiming it is a licensed and registered platform,” James said in the statement, adding her office was seeking “disgorgement of any revenues derived from Nexo’s unlawful conduct”.

Nexo did not immediately respond to a Reuters request for comment.

Crypto prices have plummeted this year as a risk-off sentiment and fears of a looming recession crushed risky assets, forcing some companies into bankruptcy.