California’s Financial Regulator Probes Nexo Over Crypto Interest Accounts Services

The California Department of Financial Protection and Innovation (DFPI) announced on Monday that it is joining forces with seven unmentioned state securities regulatory bodies to take action against the popular crypto lender Nexo over matters concerning its crypto interest accounts services.

DFPI Probes Crypto Lender Nexo

The regulatory agency argues that the crypto lender has fallen short of the state’s financial guideline on securities registration, where it termed Nexo’s “Earn Interest Product accounts” service as security.

Clothilde Hewlett, the commissioner of the DFPI, reiterated the stance of the financial body when she said:

“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.”

Among the various services offered on Nexo is the earn interest service, where users get rewarded for storing their cryptocurrencies on the platform. By offering this service to California-based citizens without registering under the agency, the crypto lender has now incurred the wrath of the financial watchdog.

The DFPI then stated in its press release that users with complaints about the Nexo service should submit a complaint to the office.

DFPI’s Hunt for Crypto Interest Accounts Providers

It is noteworthy that Nexo is not the first crypto lender to fall under a probe by the Californian financial regulator. A July report confirmed that the DFPI was set to take action against crypto lenders BlockFi and Voyager Digital due to its alleged discovery of unregistered securities. 

The report further revealed that the financial watchdog has been actively scrutinizing several companies that offer cryptocurrency interest accounts to users, especially those who have suspended withdrawals of users’ funds.

Troubled crypto lender Celsius Network, which halted users’ funds in June amid a bearish market trend, was also under probe by the DFPI. Currently, Celsius has filed for Chapter 11 bankruptcy protection and equally struggles to stand on its feet financially.

Meanwhile, several other regulatory agencies in the United States have prescribed financial guidelines aimed at safeguarding investors, while penalizing companies who fail to adhere to the mentioned standards.

Last week, the U.S. Securities and Exchange Commission charged crypto firm Sparkster for facilitating an unregistered initial coin offering that brought nearly $30 million into the purse of the company.

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