California Department of Financial Protection & Innovation has issued a desist order against Nexo, a crypto lending platform. This is part of an ongoing investigation into companies that offer interest-bearing cryptocurrency assets accounts. According to the agency, it will join seven other American regulators in taking action against Nexo. CNBC reports that the other states affected are Kentucky, New York and Maryland, Oklahoma, South Carolina. Washington, and Vermont.
In the filing Nexo’s earn interest product, the DFPI claimed that it was an unqualified security. This means that the security has not been cleared for sale by the government in the form an investment contract. The product offered up to 36% annual interest.
Since Feb. 19, the product was not available to any new US users. Existing U.S. account holders could not make new deposits to their accounts due to the $100 million fine that BlockFi received from the Securities and Exchange Commission. This came after BlockFi found the BlockFi Interest Account an unregistered security. However, the DFPI filing claimed that Nexo account holders who have automatic renewal continue to receive interest payments.
Related: Nexo invests $50M more in buyback program
In July, the DFPI stated that it would be investigating crypto-interest accounts offered by companies. Clothilde Shewlett, DFPI Commissioner, stated in a statement that the action against Nexo was being taken.
“These crypto-interest accounts are securities. Investor protections are provided by the law to protect investors, including disclosure of any potential risks.
On Aug. 8, the DFPI issued a consent judgment against Celsius Network, stating that Alex Mashinsky, CEO of Celsius Network, made false representations and omissions regarding its offering of crypto interest accounts. Celsius filed for bankruptcy July 14.
Voyager Digital filed a desist order and refrain order on June 3rd by the DFPI, a month after Voyager Digital filed for bankruptcy. California Governor Gavin Newsom rejected a bill that would have established a regulatory and licensing framework for digital assets in California. He called the move “premature.”