Nexo to pay $45 million in fines to U.S. regulators

The crypto lending platform Nexo has reached an agreement with U.S. regulators over allegations of unregistered sale of securities. The company will pay $45 million in fines as part of the settlement.

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 U.S. Securities and Exchange Commission (SEC), as well as regulators in several states, deemed the firm’s Earn Interest Product (EIP) a security.

According to the SEC, the company failed to register the offering in accordance with applicable law and circumvented disclosure requirements.

Today we charged Nexo Capital Inc. with failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle charges, Nexo agreed to pay $22.5 million and cease its unregistered offer and sale of the EIP to U.S. investors.

— U.S. Securities and Exchange Commission (@SECGov) January 19, 2023

“We are interested not in the labels affixed to offerings, but in their economic realities. And part of this reality is that crypto assets are not exempt from federal securities laws,” said Gurbir Grewal, director of the SEC’s Division of Enforcement.

Under the agreements with the regulators, Nexo will pay a $22.5 million fine to the SEC, with a similar amount to state regulators. The cryptocurrency company will discontinue the offering of the EIP to U.S. investors.

The SEC noted that in settling the claims against Nexo, it took into account the company’s cooperation and its proactive decision to exit the U.S. market.

“We are confident that a clearer regulatory framework will soon emerge, and companies like Nexo will be able to offer value-creating products in the United States in compliance with the requirements, while the United States will further strengthen its position as a driver of innovation in the world,” said Nexo co-founder Kosta Kanchev.

In February 2022, the company’s rival, the BlockFi platform, settled similar charges brought by the SEC and regional authorities, agreeing to pay $100 million in fines.

In January, searches were conducted at Nexo’s Bulgarian offices as part of an investigation into potential anti-money laundering violations. The company faced a significant outflow of funds.

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