On Monday, state securities regulators in California and several other states took action against Nexo Group, the parent company of cryptocurrency lender Nexo. These regulators deemed the Earn Interest Product offered by Nexo Group to be an unregistered security and therefore took action against Nexo Group.
According to a press release issued by the California Department of Financial Protection and Innovation (DFPI). These cryptocurrency interest accounts are considered securities and are therefore subject to the investor protections provided for under the law. One of these protections requires adequate disclosure of the risks associated with investing in these accounts.
In the documents, it was also said that Nexo had misrepresented the accounts. And given the impression to potential investors that it is a licensed and registered platform.
According to one of the papers, these interest-earning accounts, which were referred to as “Earn Interest Product,” enabled investors to deposit assets with Nexo in return for getting yields of up to 36% on their deposits. The name of the product comes from the fact that it earned interest.
On the other hand, Nexo claims that just one asset generates an interest rate of 36%. And the company does not disclose or promote this yield in any of its marketing materials. The corporation claims that some of its most famous assets, such as Bitcoin, only receive returns in the single-digit percentages of the total amount invested.
When California’s securities regulator filed orders to stop doing business with the firm, it was supported by regulators from Vermont And also Oklahoma, South Carolina, Kentucky, and Maryland, among other states. According to Nexo’s Licenses and Registrations, the firm is authorized to do business in the states of California, Oklahoma, South Carolina, and Maryland as of the time that this article was written.
In related news, Nexo has just bought a share in the federally chartered bank. It is located in the United States of America known as Summit National Bank. Nexo is able to broaden its range of financial services across the United States as a result of the investment. This enables the company to provide customers with a diverse selection of crypto-related options. Such as the ability to open accounts and apply for asset-backed loans and card programs.
Nexo co-founder and CFO Kalin Metodiev, who would also join the board of Summit National Bank, referred to the move as another landmark in Nexo’s dedicated drive to better serve our US customers in compliance with the ever-changing regulatory landscape. Metodiev will also serve on the board of Summit National Bank.
Through this transaction, Summit National Bank will be helped in reimagining itself as a contemporary Fintech institution. Digital asset services will be provided. And a bridge will be created between traditional financial services and the Web 3 ecosystem. The goal of this transaction is to strengthen the capabilities of both companies.
Nexo said that the transaction would further extend their presence in the United States. And enable them to provide their retail. Institutional customers in the United States with more creative solutions that exist at the crossroads of conventional finance and blockchain.
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