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Crypto Lender Nexo Fined $46.5M for US Securities Law Violations

by Arnab Shome
  • The company agreed to the settlement, paying the monetary penalty.
  • It is also facing a criminal investigation in Bulgaria.
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The crypto lending platform Nexo has settled with federal and state regulators in the United States for offering and selling unregistered securities, paying a total penalty of $45 million. The Securities and Exchange Commission (SEC) received $22.5 million, and the rest went to state regulatory authorities.

In addition to the fine, the Attorney General of New York obtained another $1.5 million for the state to settle with the platform for its services through a virtual currency trading platform called Nexo Exchange. Thus, the total penalty on the platform increased to $46.5 million.

Nexo Settles with the SEC and Other State Regulators

The regulators, federal and state, blamed Nexo for offering and selling a cryptocurrency lending product, Earn Interest Product, that was classified as securities. These products gave users a fixed interest in depositing their crypto assets on the platform.

“We charged Nexo with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” said the Chair of the SEC, Gary Gensler. “Compliance with our time-tested public policies isn’t a choice. Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable.”

The order is similar to a $100 million settlement of the SEC and other state securities regulators with BlockFi, another crypto lending platform now under bankruptcy proceedings. Nexo voluntarily ceased offering lending products to new US customers last February after the BlockFi settlement. The crypto lending platform also ceased paying interest on new funds.

Moreover, the company ceased offering its products in certain US states last month as a part of its permanent exit from the US.

“Among other actions, Nexo is ceasing its unregistered lending product as to all US investors,” Gensler added.

An official guide of Nexo on its EIPs.

New York’s Extra Effort against Nexo

Along with the actions of the regulatory agencies, the New York state’s Office of the Attorney General filed a separate civil lawsuit against Nexo last September. The crypto-lending platform has around 3,000 investors from New York.

In addition to the monetary penalty, Nexo is now banned from the securities industry in New York for five years and has to notify all of its clients to withdraw assets from the platform by 1 April 2023. On top of that, the company agreed to conduct identity verification of new customers to prevent further violations.

“Cryptocurrency companies are unreliable and shady, but they are not immune from accountability,” said the New York Attorney General, Letitia James. “Nexo ignored repeated warnings by my office to register, and today, they are paying the price for their wrongdoing. The days of crypto companies acting like the rules do not apply to them are ending.”

Nexo’s Response

Despite paying the hefty fine and taking the big business decision, Nexo did not admit or deny the allegations against it, which is a standard practice in such settlements.

The company is now calling the monetary settlement a “landmark resolution with US regulators,” highlighting its proactive moves and the fact that the regulators did not bring “any fraud, or misleading business practices” charges.

“We are content with this unified resolution which unequivocally puts an end to all speculations around Nexo’s relations to the United States. We can now focus on what we do best - build seamless financial solutions for our worldwide audience,” said Antoni Trenchev, the Co-Founder of Nexo.

Meanwhile, Nexo is facing backlash outside the United States. Its offices in Bulgaria were raided earlier this month by local investigators and foreign agents. Furthermore, the Bulgarian prosecutors have launched an international operation to investigate the company for allegedly committing financial crimes, failing its anti-money laundering (AML) processes, and allowing transactions that violate the international sanctions against Russia.

The crypto lending platform Nexo has settled with federal and state regulators in the United States for offering and selling unregistered securities, paying a total penalty of $45 million. The Securities and Exchange Commission (SEC) received $22.5 million, and the rest went to state regulatory authorities.

In addition to the fine, the Attorney General of New York obtained another $1.5 million for the state to settle with the platform for its services through a virtual currency trading platform called Nexo Exchange. Thus, the total penalty on the platform increased to $46.5 million.

Nexo Settles with the SEC and Other State Regulators

The regulators, federal and state, blamed Nexo for offering and selling a cryptocurrency lending product, Earn Interest Product, that was classified as securities. These products gave users a fixed interest in depositing their crypto assets on the platform.

“We charged Nexo with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” said the Chair of the SEC, Gary Gensler. “Compliance with our time-tested public policies isn’t a choice. Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable.”

The order is similar to a $100 million settlement of the SEC and other state securities regulators with BlockFi, another crypto lending platform now under bankruptcy proceedings. Nexo voluntarily ceased offering lending products to new US customers last February after the BlockFi settlement. The crypto lending platform also ceased paying interest on new funds.

Moreover, the company ceased offering its products in certain US states last month as a part of its permanent exit from the US.

“Among other actions, Nexo is ceasing its unregistered lending product as to all US investors,” Gensler added.

An official guide of Nexo on its EIPs.

New York’s Extra Effort against Nexo

Along with the actions of the regulatory agencies, the New York state’s Office of the Attorney General filed a separate civil lawsuit against Nexo last September. The crypto-lending platform has around 3,000 investors from New York.

In addition to the monetary penalty, Nexo is now banned from the securities industry in New York for five years and has to notify all of its clients to withdraw assets from the platform by 1 April 2023. On top of that, the company agreed to conduct identity verification of new customers to prevent further violations.

“Cryptocurrency companies are unreliable and shady, but they are not immune from accountability,” said the New York Attorney General, Letitia James. “Nexo ignored repeated warnings by my office to register, and today, they are paying the price for their wrongdoing. The days of crypto companies acting like the rules do not apply to them are ending.”

Nexo’s Response

Despite paying the hefty fine and taking the big business decision, Nexo did not admit or deny the allegations against it, which is a standard practice in such settlements.

The company is now calling the monetary settlement a “landmark resolution with US regulators,” highlighting its proactive moves and the fact that the regulators did not bring “any fraud, or misleading business practices” charges.

“We are content with this unified resolution which unequivocally puts an end to all speculations around Nexo’s relations to the United States. We can now focus on what we do best - build seamless financial solutions for our worldwide audience,” said Antoni Trenchev, the Co-Founder of Nexo.

Meanwhile, Nexo is facing backlash outside the United States. Its offices in Bulgaria were raided earlier this month by local investigators and foreign agents. Furthermore, the Bulgarian prosecutors have launched an international operation to investigate the company for allegedly committing financial crimes, failing its anti-money laundering (AML) processes, and allowing transactions that violate the international sanctions against Russia.

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