Nexo Capital, one of the largest cryptocurrency lending platforms, has reached a $45 million settlement with the US Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA). Nexo was facing regulatory scrutiny for failing to register its Earn Interest Product (EIP).
Nexo reaches $45M settlement with the SEC
The SEC and NASAA confirmed this settlement in two independent statements issued by the regulatory bodies. According to the SEC, Nexo has agreed to pay $22.5 million as a penalty. The lender has also agreed to halt offering an unregistered product to US investors.
The report also said that the other $22.5 million would be paid as fines to settle similar charges by regulatory bodies in different states. According to NASAA, the investigations were conducted by at least 17 state regulators, with Nexo paying a fine of $424,528 to each state.
NASAA has also issued its own statement saying that the settlement comes after the regulatory completed investigations into Nexo. The crypto lender allegedly offered and sold unregistered securities during the year that the investigations were conducted.
The regulator observed that EIP investors received passive interest on their digital assets after lending them to Nexo. Nexo did not disclose the activities it undertook to generate the income necessary to provide returns to investors. The lender marketed EIP and other products to investors in the US, offering returns as high as 36%.
According to the SEC, the negotiations for the settlement amount took into consideration factors like the cooperation of the lender and the measures taken by Nexo to address the deficiencies in compliance
The chair of the SEC, Gary Gensler, further said that the commission required compliance with public policies. Gensler noted that the crypto firms that failed to comply would be held accountable.
“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 said.
The co-founder of Nexo, Antoni Trenchev, commented on this development, saying that the firm was glad to resolve the issue with regulators. He added that the lender would not focus on offering seamless financial solutions that meet the needs of its global audience.
The settlement comes shortly after the SEC filed a lawsuit against Genesis Global Capital and Gemini. The SEC sued the two companies for offering unregistered security through the Gemini Earn product.
Nexo’s regulatory woes
Nexo is currently under regulatory investigation in Bulgaria. Earlier this month, Bulgarian authorities conducted a raid on Nexo’s offices over claims of money laundering and breaching international sanctions against Russia. Nexo acknowledged the search at its Bulgarian offices but stated that the office only handled back-office tasks.
On January 16, Nexo took action against the regulatory body of the Cayman Islands. Nexo said the Cayman Islands Monetary Authority focused more on enforcement action in denying the lender a virtual asset service provider (VASP) license.
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