Nexo Capital Inc. was fined by the US Securities and Exchange Commission (SEC) over the unregistered offering and sale of its debt product.
The securities regulator said in a statement that Nexo agreed to pay a cumulative penalty of $45 million. This includes a $22.5 million fine for offering and selling the product to US investors.
The platform will also pay an additional $22.5 million to resolve similar claims brought by state regulators.
Nexo Earn Product Considered Infringing
Pursuant to the SEC’s directive, Nexo began marketing and selling its Earned Interest Product (EIP) in and around the United States in June 2020. The product assured holders that Nexo would pay interest on it. However, according to the order, Nexo used this opportunity to use investors’ crypto assets in various ways to make interest payments and generate income for its own business.
The SEC alleges that the EIP is a security, and that its sale and offer do not meet the requirements for exemption from SEC registration.
SEC Chairman Gary Gensler said, “Compliance with our time-tested public policies is not an option. Where crypto companies do not comply, we will continue to pursue the facts and the law to hold them accountable. In this case, among other actions, Nexo is closing its unregistered loan product to all US investors.
However, the platform has neither accepted nor denied the allegations. The SEC says it has only agreed to the agency’s cease-and-desist order.
Departure from US markets
Last month, Nexo announced the “regrettable but necessary decision” to gradually phase out its goods and services in the US over the coming months. Meanwhile, according to Nexo’s website, EIP is not available to residents of certain countries, including the United States, Bulgaria, and Estonia.
Nexo co-founder Antoine Trenchev said, “We are satisfied with this unified resolution, which clearly ends all speculation regarding Nexo’s ties to the United States. We can now focus on Do what we do best – build seamless financial solutions for our worldwide audience.”
SEC gets tighter
In particular, the SEC has become stricter with crypto products. According to Cornerstone Research, 30 enforcement actions related to cryptocurrencies were brought by the SEC in 2022, headed by Gary Gensler. This is a 50% increase from 2021 as per the report.
That said, lending products remain a subject of regulatory debate in the U.S. This month, the SEC also charged Gemini for making unregistered offerings through its Gemini Earn program.
As far as Nexo is concerned, this is not the end of the troubles for the platform. Bloomberg reported last week that Bulgarian police raided the lender’s Sofia office. Now, Nexo is part of an investigation into possible tax crimes, money laundering and illegal banking activities.
Meanwhile, media reports state that the lending platform has filed a lawsuit against the Cayman Islands Monetary Authority (CIMA). This relates to CIMA’s refusal to grant a virtual asset license to Nexo.
BeInCrypto has reached out to the company or individual involved in the story for an official statement regarding the recent developments, but has not yet received a response.