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On Monday, California and several other state regulatory bodies scrutinizing securities said they were going after Nexo Group, parent to crypto lender Nexo, for allegedly offering interest-earning accounts to customers through unregistered securities.

Eight states, which include California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont, are suing the company for this violation. New York even hopes to permanently prohibit Nexo – which has over 5 million users and handles more than $3.8 billion in digital assets – from selling any securities in the future.

Until Nexo complies with registration rules, the company cannot offer interest-bearing accounts to citizens of the aforementioned eight states. The company is currently battling several cease-and-desist orders across the states for failing to make the requisite disclosures to customers.

The accounts which violated the registration requirements are known as “earn interest products," which permitted users to earn yields as high as 36% on deposits.

“Cryptocurrency platforms are not exceptional; they must register to operate just like other investment platforms,” said New York Attorney General Letitia James. “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.”

The move comes in the wake of several high-profile collapses of businesses in the crypto industry, particularly Celsius, which also offered interest-bearing accounts.

Across Vermont and New York, thousands of Americans are potentially impacted by Nexo's businesses. The Vermont filing pointed out that “investors have no part in selecting, monitoring, or reviewing the revenue-generating activities that Respondents utilize to earn this interest.”

Nexo, however, said it has been cooperating with governmental regulators and underlines that it was not one of the companies requiring external help as a result of the collapse of the algorithmic stablecoin Terra earlier this year.

“We have been working with U.S. federal and state regulators and understand their urge, given the current market turmoil and bankruptcies of companies offering similar products, to fulfill their mandates of investor protection by examining past behavior of providers of earn interest products,” Nexo said. 

“As the recent months have clearly underlined, Nexo is a very different provider of earn interest products, as showcased by the fact that it did not engage in uncollateralized loans, had no exposure to Luna or Terra, did not have to be bailed out, or needed to resort to any withdrawal restrictions.”