Crypto Lender Nexo Pays $45 Million Fine For Not Registering EIP

Key Points:

• Nexo was accused by the SEC of failing to register the offer and sale of its EIP.
• The crypto lender has agreed to pay a punishment of $22.5 million to the SEC as well as an additional $22.5 million to resolve comparable complaints from state authorities.
• The SEC noted Nexo’s decision in December 2022 to voluntarily restrict access to its EIP in eight states and cease signing up any new U.S. clients when it agreed to the settlement.

Nexo Capital, a cryptocurrency lender, has agreed to pay $45 million in fines to the North American Securities Administrators Association (NASAA) and the U.S. Securities and Exchange Commission (SEC) for failing to register the offer and sale of its Earn Interest Product (EIP).

The SEC and NASAA both released a statement on January 19 announcing the news. In order to resolve comparable complaints from state authorities, Nexo has agreed to pay a $22.5 million fine to the SEC as well as an additional $22.5 million.

The SEC noted Nexo’s decision in December 2022 to voluntarily restrict access to its EIP in eight states and cease signing up any new U.S. clients when it agreed to the settlement. Prior to it, the company had terminated customer relationships in two other states.

According to NASAA, following a year of investigations into Nexo’s suspected offer and sale of securities, a settlement in principle has been reached.

“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 added that at least 17 different state securities authorities, who concurred with the conditions of Nexo’s settlement, carried out the investigation.

Although the states were not identified, the company would nevertheless make a $424,528 payment to each. In a tweet on January 19, Nexo announced the news.

The SEC said that during settlement discussions, the commission took into account the company’s rapid remedial actions and degree of cooperation in resolving their deficiencies.

According to a source from last week, Bulgarian authorities are looking into Nexo on suspicion of money laundering, tax evasion, unauthorized banking, and computer fraud. It also has regulatory challenges in other countries.

Due to challenging regulatory hurdles in the US, the crypto lender is also giving up on the US market.

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Harold

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