New York Attorney General Letitia James is suing crypto firm Nexo, alleging that the company misled customers by saying that it was registered to sell securities and commodities and that it was not approved to offer services such as the “Earn interest product” that promised returns on deposited cryptocurrencies. It is the latest legal move in a battle between regulators and crypto firms seeking to offer interest-bearing accounts, often insisting they should not be classified as securities.

Seven other states — California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont — are also filing “administrative actions” against the company, according to a press release of the New York AG. The release also quotes James as saying, “Nexo has violated the law and investor confidence by falsely claiming it is a licensed and registered platform. Nexo must stop its illegal operations and take the necessary measures to protect its investors.”

Last year, James sent a letter to Nexo and the now-bankrupt Celsius, ordering the exchanges to stop offering services they were not allowed to offer in New York. At the time, Nexo responded by claiming it was already blocking New York citizens from accessing its service. The lawsuit, which you can read in full below, alleges that this was not true. According to the lawsuit, Nexo told the attorney general’s office that it notified its New York customers that their accounts would be made inaccessible and that it would close all of its services in the state by November 11, 2021. However, the AG claims that Nexo actually still had more than “5,000 EIP accounts funded by New York investors” in July 2022, according to data it provided regulators.

The lawsuit also alleges that Nexo’s claims of being a “licensed and regulated digital asset institution” are misleading. At the time of writing, the company’s site claims to be “in full compliance with all applicable global and local regulations and standards” for the areas in which it operates, and lists the licenses it has to operate. Entries on that list include licenses from Maryland, Oklahoma and South Carolina, states that also file complaints against the company, according to the New York AG.

A statement emailed to The edge by Nexo spokesperson Magdalena Hristova says the company is “working with U.S. federal and state regulators and understanding their urge, given the current market turmoil and foreclosures of companies offering similar products, to fulfill their investor protection mandate through past behavior from providers of interest rate products.”

According to the statement, Nexo voluntarily stopped providing access to new US customers to its Earn Interest Product after the Securities and Exchange Commission released its guidelines on crypto products that offer interest in February 2022. The statement continues, saying that “Nexo is committed to finding a clear path for the regulated supply of products and services in the US, ideally at the federal level.” The statement does not address the allegations that it misreported and omitted information about the “legal compliance” of its products, as the lawsuit puts it.

Earlier this year, crypto exchange BlockFi had to pay the SEC $100 million in fines after the regulator ruled that its BlockFi interest accounts were unregistered securities and that the company was not properly registered to provide investment services. The agency also threatened to sue Coinbase if it launched a similar program in 2021.