Nexo Defends Itself Against Cease and Desist Allegations
The firm has countered regulators who say that it failed to inform its customers of risk.
Key Takeaways
- Nexo has defended itself against charges that were issued by various state regulators in the U.S. yesterday.
- Regulators say that Nexo offered interest rates as high as 36% without informing customers of the risk.
- Nexo says that its promised interest rates are usually single-digit and not as high as regulators claim.
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Nexo has defended itself against various U.S. regulators by claiming it promises modest interest rates.
Nexo Says It Offers Nominal Rates
Nexo has defended itself against cease and desist orders from eight U.S. states by claiming that it does not offer exceedingly high interest rates on its products.
In a statement, the company said that the interest rates on “the overwhelming majority” of its supported crypto assets are “in the single-digit percentages.”
It added that those rates are chosen with the “underlying sustainability of our business and security of customer assets in mind,” implying that it aims to offer low-risk products.
Nexo noted that it only promises as high as 36% interest for one asset—Axie Inifinity’s AXS token. In fact, the staking reward on that asset is currently close to 60%.
It insists that such a high rate is an “exception” and does not advertise that rate in marketing materials.
By contrast, the company’s interest rate for Bitcoin is “nominal” and usually between 1.5% and 7%.
Nexo’s advertised interest rates are at the center of various states’ charges against the firm. Regulators in California, for example, cited Nexo’s “significantly higher” rates of return to suggest that the firm offered securities without fully informing its customers of the risks.
The question of whether Nexo serves U.S. citizens is also under discussion. Today, the firm said it no longer onboards new U.S. clients to its Earn Interest Product following actions against BlockFi in February. It also said that it “stopped the product for new balances for existing clients.”
State regulators nevertheless claimed yesterday that 93,000 U.S. residents hold $800 million in Nexo accounts.
The remainder of Nexo’s update is identical to statements seen yesterday. In response to various cease-and-desist orders, Nexo insisted that it is working with regulators and attempted to distinguish itself from its competitors.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.
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