NY AG orders 2 more banks to stop operating in state

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NY AG orders 2 more banks to stop operating in state

- New York attorney general Letitia James said she ordered two other banks to stop operating in the state and also sent three other platforms emails with questions about their operations.

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Although James did not name the firms, Celsius Network LLC confirmed it received a cease-and-desist letter in a statement, while a person familiar with the matter said Nexo Financial LLC was among the firms that had received a request for more information.

Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now forcing two crypto companies to shut down and force three more to answer questions right away, James said in a press release Monday.

The release states that virtual currency lending products fall squarely within any of several categories of security under the Martin Act, meaning they must be registered with the attorney general's office.

The attorney general's office posted two letters on its website in conjunction with the release. Although the office redacted the names in the letters, the one requesting more information was Nexo letter in the title and the other by ordering the companies to cease and desist contained Celsius letter. A person familiar with the matter confirmed Nexo received the information request and Celsius confirmed it had received a cease-and-desist letter.

Nexo co-founder Antoni Trenchev said in a statement that the company doesn t offer its earned or exchange products to New York so it makes little sense to receive C&D for something we are not offering in NY anyway. He said the company will respond to the Attorney General and described the issue as a clear case of mixing up the recipients of the letter. Crypto lending firms have rapidly gathered tens of billions of dollars by offering customers accounts that let them deposit cryptocurrencies and in some cases earn double-digit interest. The crypto accounts are not protected by insurance and some regulators have said the accounts should be federal securities with more disclosures of their risks.

New York joins regulators in Kentucky, Texas, Alabama, Vermont and New Jersey to take actions against crypto lending firms. Among companies used by those states have included Cryptoloop Co. and Celsius.

In February the crypto exchange Bitfinex reached a settlement with James over allegations that it lied about the loss of commingled clients and corporate funds and secretly concealed their reserves. Without admitting or denying any wrongdoing, the officials control Bitfinex and the affiliated stablecoin Tether agreed to pay $18.5 million and to stop trading activities in New York with New Yorkers.

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