New York shuts down 2 crypto firms for unlawful activities and investigates 3 others

• New York ordered the shut down of two crypto lending platforms and directed the investigation of three others.
• All firms, based on the announcement of NY Attorney General Letitia James, were unnamed.
• "Cryptocurrency platforms must follow the law, just like everyone else," James said.

New York Attorney General Letitia James on Monday ordered the shutdown of two cryptocurrency lending platforms for "unlawful activities" and directed the investigation of three others.

All the firms' names were redacted in the two letters published in conjunction with the press release. However, initial reporting from The Block showed the cease-and-desist letter was marked with the title "Nexo Letter," while a request for information was tagged "Celsius Letter" upon initial publication. The supposed slip-ups have been rectified and the letters are now labeled with generic names.

The two platforms, including Nexo, were instructed to cease all activities within 10 days from October 18 for "unlawfully selling or offering for sale securities and/or commodities" as required by New York's Martin Act, which mandates offerers to register, the letter said.

Nexo said told Insider via email it is not offering its Earn product in New York, so it "makes little sense" to be receiving a cease-and-decist for something they are not offering. "We use IP-based geoblocking," it added.

Meanwhile, the three others, including Celsius Network, were requested to give more information about how they operate, such as what they do with cryptocurrencies deposited in their platforms. Details should include all wallet addresses and entities that provide custody, according to a separate letter. The attorney general also sought clarification on whether the platforms accept fiat currency or accept tether as collateral.

Celsius in October just raised $400 million in its latest fundraising round, pushing its valuation to $3 billion. The latest cash injection comes as Texas, New Jersey, Alabama, and Kentucky have taken action against the firm's "Earn Interest Accounts." All states except for Kentucky have also gone after crypto lending firm BlockFi earlier this year.

"Cryptocurrency platforms must follow the law, just like everyone else," James said in a statement. "My office is responsible for ensuring industry players do not take advantage of unsuspecting investors."

She also discussed in detail the state's Martin Act, which encompasses a broad list of instruments that should be declared as securities. This includes "any stocks, bonds, notes … or negotiable documents of title, or foreign currency orders, calls or options therefore hereinafter called security or securities."

"The nature and function of the most common virtual currency lending products or services demonstrate that they fall squarely within any of several categories of 'security' under the Martin Act," the statement said.

The state attorney general's office has been ramping up its crackdown on virtual currencies. For instance, crypto-trading platform Coinseed in June announced it will close down after being sued by James in February for selling "worthless" tokens and moving investor money without permission.

Cryptocurrencies have been at the center of a tense period as global regulators bring their heads together on how best to increase oversight of the $2.6 billion industry.

Multiple efforts to rein in various products have been imposed. Still, the market capitalization of digital assets continues to balloon - now buoyed by an imminent bitcoin-futures exchange-traded fund poised to start trading this week.