• The California Department of Financial Protection and Innovation (DFPI) made the announcement on September 26 to bring action against the Nexo Group.
  • The DFPI took these actions, citing a lack of securities registration despite offering lending services to California residents.
  • Along with the call for action, California also issued a cease and desist notice for Nexo over its Earned Interest Product (EIP) accounts.

As crypto adoption across the world grows, regulators and law enforcement agencies would also naturally widen their watch over this market, and the effects of the same are visible.

The most recent company to be targeted is the cryptocurrency lending protocol, Nexo, which has been given a cease and desist notice from the California regulatory department.

Nexo gets a big NO

In a press release on September 26, the DFPI stated that it would be joining seven state securities regulators to take action against the Nexo Group (Nexo). 

The regulator stated that they are following their previous aggressive enforcement efforts against unregistered interest-bearing crypto accounts. 

Adding to the same, the announcement read,

“These crypto interest accounts are securities and are subject to investor protections under the law, including adequate disclosure of the risk involved. Collectively, these actions protect investors while ensuring that California remains an ideal setting for responsible financial innovation.”

According to the DFPI, Nexo’s EIP accounts, which offered up to a 36% annual interest rate, were offered to the residents of California without being registered with the authorities.

Nexo comes to an end in California

The DFPI did not stop at just pursuing legal actions against Nexo but also issued a cease and desist notice citing similar reasons for lack of securities registration. 

The Commissioner of Financial Protection and Innovation specified that no permit was issued to Nexo for selling securities. Despite the same, over 18,000 California residents collectively held about $174.8 million in these accounts as of July 31, 2022.

DFPI followed similar actions against BlockFi Lending LLC, Voyager Digital LLC, and Celsius Network Inc. BlockFi is facing a $100 million penalty from the SEC, and the latter two filed for Chapter 11 bankruptcy.

What the future holds for Nexo is yet to be seen.

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