In addition to paying fines, Nexo will reportedly cease its unregistered lending product to all US investors.
Crypto-lending firm Nexo has agreed to pay fines of $45 million to the Securities and Exchange Commission (SEC) for violating federal securities law. According to the regulatory agency, Nexo failed to register its crypto asset lending product. The SEC further stated that the crypto platform initiated this unregistered security in 2020, allowing US customers to earn.
Addressing the situation in a statement, SEC Chair Gary Gensler explained:
“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. Compliance with our time-tested public policies isn’t a choice.”
In addition, Gensler suggested that the SEC would remain relentless in holding crypto-operating firms accountable. He concluded that Nexo would cease its unregistered lending product to all US investors.
The Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, echoed some of Gensler’s statements. He also stressed that the SEC is after compliance with federal securities laws regardless of any pre-stated product “labels.” As the Division of Enforcement Director put it:
“If you’re offering or selling products that constitute securities under well-established laws and legal precedent, then no matter what you call those products, you’re subject to those laws, and we expect compliance.”
In other words, Grewal suggested that crypto assets pose the same economic realities as other assets that fall under federal securities laws.
Nexo Agrees to Pay Fines Without Affirming or Denying SEC Allegations
Nexo agreed to pay the fines without admitting any wrongdoing. The crypto lender will remit $22.5 million to the SEC and another $22.5 million penalty fee to state regulators. According to the SEC, the latter payment is in relation to the Earn Interest Product to US investors.
Nexo expressed contentment with the SEC resolution and looked forward to more structured oversight within the crypto industry. According to the crypto lender’s co-founder Kosta Kantchev, they “are confident that a clearer regulatory landscape will emerge soon, and companies like Nexo will be able to offer value-creating products in the United States in a compliant manner.”
Allaying the SEC’s grievances also sees Nexo “focus on what we do best” and develop “seamless financial solutions” for global audiences.
The Nexo-SEC penalty development comes amid increasing efforts by US regulators to crack down on infractions in the crypto space. These scrutiny efforts intensified following the sudden and dramatic collapse of crypto exchange FTX last November.
Other similar SEC-driven crackdowns include lawsuits against Gemini Trust Company LLC and Genesis Global Capital LLC. According to the securities regulator, both crypto-centric platforms also illegally sold products to countless investors via their crypto lending program.
Nexo is also butting heads with authorities elsewhere amid its recently-concluded SEC case. According to a Reuters report, Bulgarian authorities charged four people as part of an ongoing investigation into the crypto lender. On January 12th, these authorities raided more than 15 Nexo sites for a string of reported financial crimes.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.