Nexo sued for operating crypto brokerage without license and lying about it

Rick Steves

“Nexo violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform. Nexo must stop its unlawful operations and take necessary action to protect its investors.”

Nexo is being sued by eight U.S. state securities regulators, including the New York Attorney’s Office led by Attorney General Letitia James.

The cryptocurrency group’s two entities, Nexo Inc. and Nexo Capital, are being charged with failing to register with the state as securities and commodities brokers or dealers and for lying to investors about their registration status.

According to the complaint, Nexo failed to register and misrepresented to investors that they are a licensed and registered platform.

The lawsuit alleges that Nexo promoted and sold securities in the form of an interest-bearing virtual currency account called the Earn Interest Product with promises of high returns for participating investors, while failing to register as a securities broker or dealer as required by state law.

In addition, the lawsuit alleges that Nexo engaged in the unregistered purchase and sale of securities and commodities through its virtual currency trading platform called the Nexo Exchange, and misled investors by falsely representing that it was in compliance with applicable laws and regulations. Roughly 10,000 New Yorkers have accounts with Nexo.

“Cryptocurrency platforms are not exceptional”

New York Attorney General James said: “Cryptocurrency platforms are not exceptional; they must register to operate just like other investment platforms. Nexo violated the law and investors’ trust by falsely claiming that it is a licensed and registered platform. Nexo must stop its unlawful operations and take necessary action to protect its investors.”

In New York, entities engaging in the offer, purchase, or sale of securities or commodities, including cryptocurrency platforms, must register with OAG although it was operating within the state or offering their products to New Yorkers. Through her lawsuit, Attorney General James seeks disgorgement of any revenues derived from Nexo’s unlawful conduct and restitution for investors.

NYAG James seeks restitution for thousands of defrauded investors, disgorgement of revenues derived from Nexo’s unlawful conduct, and permanent injunctions against the defendants’ violations of state law.

The New York Attorney’s Office has been very busy in regard to crypto, having recently reach a nearly $1 million settlement with crypto platform BlockFi Lending LLC for offering unregistered securities.

Earlier this year, Attorney General James issued a taxpayer notice to virtual currency investors and their tax advisors to accurately declare and pay taxes on their virtual investments.

In October 2021, Attorney General James directed unregistered crypto lending platforms (including Nexo) to cease operations for not fulfilling their legal obligations. In March 2021, Attorney General James warned New Yorkers of the risks of cryptocurrency investments and reminded investment platforms of their legal obligations.

NY Attorney General James urges New Yorkers who have been affected by deceptive conduct in the virtual assets market to report these issues to OAG. She also encourages workers in the cryptocurrency industry who may have witnessed misconduct or fraud to file a whistleblower complaint with her office, which can be done anonymously.

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