After Nexo, California’s financial regulator targets 11 other crypto firms over theft allegations. According to the regular, the crypto firms are running Ponzi schemes that steal millions from customers. Alleging, they stole customer funds or operated like Ponzi schemes. The DFPI announced on Tuesday in a press release.
The state filed a cease and desist order against Metafi Yielders, Elevate Pass LLC, and nine other crypto firms. The companies were operating in violation of the state security laws and misappropriating customer funds.
To directly quote the regulators in the press release,
“Each of the 11 entities allegedly offered and sold unqualified securities, and ten also made material misrepresentations and omissions to investors… The entities are all alleged to have used investor funds to pay purported profits to other investors, in the manner of a Ponzi scheme.”
Have the Crypto Firms Responded?
None of the crypto firms has responded so far. The state also filed a lawsuit against crypto Lender firm Nexo. According to the DFPI Commissioner Clothilde Hewlett,
“The DFPI will continue to protect California consumers and investors from crypto scams and frauds…These actions protect consumers and ensure California remains the premier global location for responsible crypto asset companies to start and grow.”
Is California Against Cryptocurrency?
Just like China hit cryptocurrency firms and mines in 2021, California is going for crypto firms similarly. However, unlike China, California protects its citizens by fighting money laundering Ponzi schemes posing as crypto projects.
Due to the volatile nature of the crypto firm, regulators have decided to protect their citizens. If a government fails to regulate something that harms its citizens, whether they like it or not, the citizens will end up blaming the government.
Recently, the governor of California, Gavin Newsom, declined a bill to veto cryptocurrency regulation. According to the governor, cryptocurrency requires a much more stable process. The state is, therefore, at the forefront in promoting cryptocurrency adoption; it is only fighting malicious traders. Gavin said,
“AB 2269 would establish a licensing and regulatory framework, administered by the Department of Financial Protection and Innovation, for digital financial asset activity.”Digital assets are becoming increasingly popular in our financial ecosystem, with more consumers buying and selling cryptocurrencies yearly.”
Closing Thoughts
California seems to have a booming market for cryptocurrency firms. This might be a reason why regulators are keen on the needs. According to Binance, cryptocurrency is in its wild west stages. Cryptocurrency regulation will help reduce this wildness.
However, it is difficult to determine whether firms like Nexo issued unregistered EIPs and whether such crimes are viable or simply attacks against cryptocurrency firms. There are many money-laundering schemes other than ones offering legitimate investing platforms.
Like Binance CEO CZ says, regulators should look for new ways to handle cryptocurrency. The traditional regulator methods will not work in this new market. The market is growing slowly and will soon find ways of regulating itself.
