- U.S. regulators have charged crypto lender Nexo Capital with failing to register its retail crypto lending product before offering it to the public.
- The penalty serves as a reminder for other crypto companies to comply with securities laws and regulations.
- The event highlights the increasing scrutiny of crypto companies from U.S. regulators and the importance of transparency and compliance for the crypto industry.
Crypto lender Nexo Capital has agreed to pay $45 million in penalties to the U.S. Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) for failing to register the offer and sale of its Earn Interest Product (EIP).
The news was announced by the SEC and NASAA in two separate statements on January 19. According to the statement from the SEC, Nexo agreed to pay a $22.5 million penalty and cease its unregistered offer and sale of the EIP to U.S. investors. The additional $22.5 million will be paid in fines to settle similar charges by state regulatory authorities.
Nexo Cleared of Any Fraudulent Business Practices By Fed
NASAA said in its statement that the settlement in principle comes after investigations into Nexo’s alleged offer and sale of securities after the past year of investigations. “During the investigation, it was discovered that EIP investors could passively earn interest on digital assets by loaning those assets to Nexo.”
“Nexo maintained total discretion over the revenue-generating activities utilized to earn returns for investors. The company offered and promoted the EIP and other products to investors in the U.S. via its website and social media channels suggesting in some instances that investors could obtain returns as high as 36%,” NASAA stated.
In a January 19 tweet, Nexo had tweeted to its 288,600 followers that they had reached a final landmark resolution with the SEC and NASAA. The statement further clarified that U.S. federal regulators did not allege that the company had engaged in any fraud or misleading business practices.
Nexo has reached a final landmark resolution with the U.S. Securities and Exchange Commission (SEC), the North American Securities Administrators Association (NASAA), consisting of all 50 U.S. States & 3 territories and the Attorney General of New York.🧵https://t.co/modjbPsOdV— Nexo (@Nexo) January 19, 2023
The SEC Weighs In
The SEC stated that in the settlement negotiations, the commission took into consideration the level of cooperation and the remedial acts promptly undertaken by Nexo in addressing their shortfalls.
SEC Chairman Gary Gensler said:
“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."
Gensler went on to say “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. In this case, among other actions, Nexo is ceasing its unregistered lending product as to all U.S. investors,”
While the firm didn’t admit or deny the findings from the SEC’s investigation, the Nexo settlement came on the back of a cease-and-desist order prohibiting the firm from violating any provisions of the Securities Act of 1933.
NASAA explained that the investigation was conducted by at least 17 separate state securities regulators, who agreed to the terms set out in the settlement.
On the Flipside
- Nexo’s co-founder Antoni Trenchev has stated that the company is relieved to have reached a settlement in the United States and can now focus on building financial solutions for their worldwide audience.
- The SEC has charged Nexo with failing to register its retail crypto lending product, which is a violation of regulations designed to protect investors.
Why You Should Care
Regulatory compliance issues faced by crypto companies in the U.S. are important, as they serve as a reminder that they are subject to the same laws as traditional financial institutions. The scrutiny and oversight of crypto companies by regulators are only set to increase, and other crypto companies may need to review their own compliance practices.
Find out more about Nexo:
Nexo’s Office in Bulgaria Raided on Suspected Money Laundering and Tax Crimes – DailyCoin
Read about what realistic regulation could look like:
Coinbase CEO Brian Armstrong Outlines “Realistic Blueprint” for Global Crypto Regulation – DailyCoin