When the SEC Stops, California Must Step Up - Case 2025-000001

How DFPI Can Fill the Enforcement Gap for California Investors Left Out of Federal Settlements

1. Why This Matters Now

As of October 2025, Washington faces another prolonged government shutdown, one that could potentially be the longest in U.S. history.

When federal agencies like the Securities and Exchange Commission (SEC) go dark, enforcement freezes.

For investors, especially those harmed by opaque platforms, accountability stops mid-stream.

When federal enforcement halts, investor harm doesn’t.
California has the legal and moral obligation to act where Washington will not.

2. Background: The Nexo Precedent and the Federal Void

In 2023, Nexo reached settlements with regulators, including the SEC and several states.

But those actions failed to deliver restitution for many California investors.

The SEC’s federal settlement concluded without a mechanism for affected residents to recover losses, leaving a regulatory vacuum.

For Californians, this gap is not theoretical.

It’s the difference between having an enforcement headline and having money returned to retirement accounts.

The California Department of Financial Protection and Innovation (DFPI) already has the statutory authority to intervene under the California Consumer Financial Protection Law (CCFPL).

That law was created precisely to protect state residents when federal oversight collapses or stalls.

3. DFPI’s Authority to Act

DFPI regulates financial products and services offered to California residents; including securities, lending, and digital-asset platforms.

Under state law, it can:

• Investigate misconduct that affects California consumers.
• Demand restitution and enforce penalties.
• Enjoin unlicensed or deceptive conduct.

These powers exist independently of the SEC.

DFPI does not need federal coordination to open investigations or compel restitution for Californians.

4. Historical Precedent: California Fills Federal Gaps

Pattern: Each time Washington slows, Sacramento steps forward.

5. Why DFPI Must Act Now

1. Jurisdiction Exists.
   Nexo served California residents and DFPI has direct authority.
2. Federal Action Was Incomplete.
   The SEC settlement failed to provide restitution to all affected.
3. Federal Shutdown Freezes Enforcement.
   DFPI remains operational and can continue investigations.
4. Public Trust Depends on Follow-Through.
   Justice delayed is deterrence denied.

6. Path Forward: State-Level Restitution Framework

InvestorJustice.org proposes that DFPI:

• Open a supplemental investigation into Nexo’s California accounts.
• Coordinate restitution mechanisms for affected residents.
• Publish a transparent claim-submission portal for verified filings.
• Issue public progress updates transforming enforcement into open governance.

This would make DFPI the national model for localized fintech accountability.

7. Jurisdictional Clarity

8. InvestorJustice.org’s Role

InvestorJustice.org was founded to transform private harm into public-interest education.

The Nexo case exemplifies the systemic failure of opaque enforcement.

Through the Evidence Vault, Wall of Unresolved Cases, and Investor Advisories, IJ provides tools regulators can build on, creating verified, searchable records that enable faster state action when federal agencies are stalled.

Accountability starts with exposure.
But exposure without enforcement is just noise.

9. Call to Action

California’s DFPI has both the authority and the responsibility to act now.

It can investigate, coordinate restitution, and publish progress transparently even when federal agencies are offline.

For every California investor left out of federal restitution, DFPI can still deliver justice at home.