• New York Attorney General Letitia James today announced a campaign against the crypto lending industry under the auspices of consumer protection
  • Crypto lending protocols Nexo and Celsius have received requests for information from the NYAG — but not subpoenas

Crypto lending protocols, which pay users an above-market interest rate for their digital asset deposits, have been banned in New York, the state’s Attorney General announced Monday, and an investigation is underway into the operations of two of the largest platforms. 

“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately,” said Attorney General James in a press release. “My office is responsible for ensuring industry players do not take advantage of unsuspecting investors.”

Attached to the press release, the NYAG posted two of the letters sent requesting more information. While part of the content of the letters was redacted, the file names on the NYAG’s website revealed they were sent to Nexo and Celsius.

NYAG redacted letter
The NYAG later corrected the oversight

As of now, these letters are simply requests for information and are not subpoenas thus the companies are under no obligation to respond.

Among the information requested are “all contracts, agreements, or other communications with Tether Limited, or other affiliated persons or entities,” and “a list of transactions by or through your platform or service that, in whole or in part, include USDT, including all relevant transaction details.”

Tether has loaned Celsius $1 billion dollars secured by crypto collateral, Blockworks previously reported.

The NYAG did not specify if this ban and investigation is a result of consumer complaints against the mentioned companies. 

This announcement from the NYAG comes days after Celsius closed a $400 million round valuing the company at $3.25 billion. The round was led by Caisse de dépôt et placement du Québec (CDPQ), the province of Quebec’s pension fund, and one of the largest institutional investors in the country with nearly $323 billion assets under management. Celsius has nearly $20 billion in assets under management. In a previous interview with Blockworks, its CEO Alex Mashinsky said that, “the 8.8% we pay on stablecoins is the real value of the US dollar. It’s not 0.1%, which is what JP Morgan or Wells Fargo or other people tell you that you should be earning for your dollar.”

This is not the first time Celsius has faced state scrutiny. Earlier this year the company received Cease and Desist Orders from authorities in Texas and New Jersey. Another prominent centralized lending platform, BlockFi, has faced similar questions from regulators.

Celsius did not respond to a request for comment by press time. Its token CEL is down 7%, according to data from CoinGecko.

Nexo has denied serving New York State entirely. The Nexo token NEXO is trading -2.8% lower.

  • Blockworks
    Sam Reynolds is a Taipei-based reporter, covering digital assets and regulation throughout Asia. Before joining Blockworks he was an editor at Forkast News and an analyst with IDC.