The office of the Attorney General of the State of New York has directed two crypto lending firms to cease operations in the state. The two firms, Celsius and Nexo were reportedly found to violate the Martin Act.
The move continues a sleuth of regulatory clampdowns on crypto lending firms. This comes despite growth in crypto lending platforms as previously reported by The Coinrise.
Formerly, BlockFi was asked by regulators to halt offerings of its interest accounts in New Jersey. By Sept 17, Celsius also received similar orders in the state.
Likewise, SEC Chairman Gary Gensler speaking about crypto lending and staking platforms had stated that they “take on all the indication of what Congress is trying to protect under the securities laws.” The commission also threatened to sue Coinbase if it launches any lending product.
Now, the New York Attorney General Letitia James has released cease and desist letters for Celsius and Nexo. In addition, another three firms whose names were redacted from the official release received requests for information on corporate ownership and handling of user deposits.
How the Crypto lending Platforms are Affected
According to the ‘cease and desist letter to Nexo, the OAG possessed evidence of the firm “selling or offering for sale securities and/or commodities within or from the State of New York.” This it noted was unlawful because the firm was not authorized to do so without having registered according to the Martin Act.
As a result of the violation, Nexo has been asked to “cease any and all such activity and confirm to the OAG the activity has ceased.” The crypto lender would also need to explain why the OAG shouldn’t take further action in line with the law. This is to be done within 10 days.
On its part, Celsius was asked to provide information about its ownership structure, investment strategy, and means of custody for crypto deposits. This, the firm is to do before November 1.
Three other unnamed crypto lending platforms were asked to immediately provide information about their products and activities.
Speaking about the latest directive, Attorney General James said, “Cryptocurrency platforms must follow the law, just like everyone else.” She stated this as the reason for directing the two crypto lending companies to shut down operations immediately.
Actions to Safeguard Investors.
AG James believes her office has a responsibility to protect unsuspecting investors. She has also been about the same.
Previously, Attorney General James succeeded in shutting down the cryptocurrency trading platform Coinseed, Inc. She also recovered about half a billion dollars unlawfully obtained from investors who financially backed GTV Media Group, Inc. and its parent company, Saraca Media Group, Inc.
Much earlier (in February), the AG also reached an agreement with Bitfinex, Tether, and related entities. The agreement ended their activity in the state and attracted an $18.5 million penalty on the companies.