SEP 26, 2022
(COLUMBIA, S.C.) – South Carolina Attorney General Alan Wilson announced today that the Securities Division (the “Division”) within the Office of the South Carolina Attorney General has filed a regulatory action against a cryptocurrency interest account provider, Nexo, Inc. and Nexo Capital, Inc. (collectively, “Nexo”), in connection with Nexo’s Earn Interest Product (EIP) accounts. The Division alleges that Nexo violated the South Carolina Securities Act by offering and selling unregistered or unqualified securities in the form of its EIP accounts and that Nexo and its co-founders misrepresented and omitted material facts about the EIP accounts.
Nexo’s EIP accounts enabled customers to deposit crypto assets with Nexo; in exchange, customers passively earned interest on those deposits. Nexo offered investors interest rates of up to 36% on their deposited crypto assets, significantly higher than rates offered for short-term, investment grade, fixed-income securities or bank savings accounts. Over 93,000 United States residents have EIP accounts, of which more than 1,150 were South Carolina residents. These accounts collectively hold assets totaling approximately $800 million dollars nationally and $7.3 million dollars in South Carolina.
The Division has been participating in a working group of state securities regulators focused on interest-bearing cryptocurrency accounts. Through this coordinated effort, the Division participated in the investigation of Nexo. The action against Nexo comes on the heels of similar actions filed by the Division against BlockFi Lending and Voyager Digital and by other working group members against other crypto interest account providers, including BlockFi, Voyager, and Celsius. Celsius and Voyager are currently in Chapter 11 bankruptcy following a sharp decline in the cryptocurrency market over the summer.
The Division is continuing to consider enforcement actions against other firms that offer interest-bearing cryptocurrency accounts without complying with the South Carolina Securities Act. Firms that need to register and deal with past unregistered activity should reach out to the Division. In addition, investors should reach out to the Division to check the registration status of a firm before investing their money in an interest-bearing cryptocurrency account.
The Securities Division can be reached by calling 803-734-9916 or by email to firstname.lastname@example.org. Investors can submit a complaint or learn more about the Securities Division by visiting the Attorney General’s Office website at https://www.scag.gov/inside-the-office/legal-services-division/securities/.
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