Nexo failed to register as required by New York law
and lied to investors about their registration
NEW YORK – New York Attorney General Letitia James today joined seven state securities regulators in suing cryptocurrency firms Nexo Inc. and Nexo Capital Inc. (Nexo ), for failing to register with the state as brokers or dealers in securities and commodities and for lying to investors about their registration status. Despite warnings from the Office of the Attorney General (OAG) to register as a broker or dealer in securities and commodities, Nexo failed to register and falsely told investors that it was an approved and registered platform. In New York, entities engaged in the offering, buying, or selling of securities or commodities, including cryptocurrency platforms, must register with the OAG if they operate in the state. or offer their products to New Yorkers. Through his lawsuit, Attorney General James is seeking restitution of all proceeds from Nexo’s unlawful conduct and restitution to investors.
“Cryptocurrency platforms are not exceptional; they have to register to work like other investment platforms,” said Attorney General James. “Nexo has violated the law and the trust of investors by falsely claiming that it is a licensed and registered platform. Nexo must end its illegal operations and take the necessary measures to protect its investors. »
Today’s lawsuit – filed in New York County State Supreme Court – alleges that Nexo promoted and sold securities in the form of an interest-bearing virtual currency account called Earn Interest Product with promises of high returns for participating investors, while not registering as a broker or dealer in securities as required by state law. Additionally, the lawsuit alleges that Nexo engaged in unregistered buying and selling of securities and commodities through its virtual currency trading platform called Nexo Exchange, and misled investors by falsely stating that it was in compliance with applicable laws and regulations. About 10,000 New Yorkers have accounts with Nexo.
Attorney General James specifically accuses Nexo of violating the Martin Act of New York and New York Executive Law § 63(12). Attorney General James is seeking restitution for thousands of defrauded investors, return of revenue from Nexo’s illegal conduct, and permanent injunctions against violations of state law by the defendants.
This case stems from an investigation conducted in coordination with a task force of state securities regulators. Today, state securities regulators in California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont all filed their own administrative actions against Nexo.
Today’s filing continues Attorney General James’ efforts to regulate the cryptocurrency industry and protect New York investors. In August, Attorney General James urged New Yorkers affected by turmoil in the cryptocurrency markets — including frozen accounts and deceptive behavior — to report such issues to the OAG. In June, Attorney General James warned New Yorkers of the dangerous risks of investing in cryptocurrencies after the market hit record highs. Also in June, Attorney General James reached 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 report and pay taxes on their virtual investments. In October 2021, Attorney General James ordered unregistered crypto lending platforms (including Nexo) to cease operations for failing to fulfill their legal obligations. In March 2021, Attorney General James warned New Yorkers of the risks of investing in cryptocurrency and reminded investment platforms of their legal obligations.
Attorney General James continues to urge New Yorkers who have been impacted by deceptive conduct in the virtual asset market to report such issues to the OAG. Attorney General James also encourages workers in the cryptocurrency industry who may have witnessed misconduct or fraud to file a whistleblower complaint with his office, which can be done anonymously.
This case is being handled by Assistant Attorney General Jesse Devine of the Office of Investor Protection, with assistance from Legal Assistant Charmaine Blake, also of the Office of Investor Protection, and Detective Brian Metz of the Investigations Division. . The Investor Protection Office is headed by Bureau Chief Shamiso Maswoswe and Acting Deputy Bureau Chief Ken Haim, and is part of the Economic Justice Division, which is headed by Chief Deputy Attorney General Chris D’Angelo and overseen by Senior Deputy Attorney General Jennifer. Sampling.
