Despite agreeing to the settlement, the crypto lender did not admit or dispute the findings of the SEC’s inquiry.
Nexo Capital has agreed to pay the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) $45 million in penalties for failing to register the offer and sale of its Earn Interest Product (EIP).
The SEC and NASAA revealed the announcement in separate statements on January 19. Nexo agreed to pay a $22.5 million penalty and discontinue its unregistered offer and sale of the EIP to US investors, according to the SEC announcement.
According to the article, a further $22.5 million will be paid in fines to satisfy identical claims brought by state regulatory authorities.
NASAA stated in a statement that the settlement in principle follows an inquiry into Nexo’s suspected offer and sale of securities over the previous year.
“During the research, it was determined that EIP investors may earn interest on digital assets passively by lending them to Nexo.”
“Nexo retained complete control over the revenue-generating activities used to generate returns for investors. “The firm sold and promoted the EIP and other products to investors in the United States through its website and social media platforms, implying that investors may get returns of up to 36% in some cases,” it said.
The SEC claimed that during the settlement negotiations, the commission considered Nexo’s level of cooperation and the swift corrective actions taken to rectify their inadequacies.
Gary Gensler, Chairman of the Securities and Exchange Commission, stated:
“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.”
“We don’t have a choice except to follow our time-tested public policy. Where crypto companies fail to comply, we will continue to hold them accountable based on the facts and the law. In this case, Nexo, among other things, is discontinuing its unregistered loan product to all US investors,” he noted.
While the company did not explicitly confirm or dispute the SEC’s allegations, Nexo’s settlement was based on a cease-and-desist order agreement that barred the company from breaching any Securities Act of 1933 restrictions.
NASAA further stated that the inquiry was carried out by at least 17 different state securities authorities, all of whom agreed to the terms of Nexo’s settlement.
Although the states were not named, Nexo agreed to pay a $424,528 fine to each.
Nexo verified the news to its 288,600 followers in a tweet on January 19.
According to Nexo, federal officials in the United States made no allegations of fraud or deceptive business activities.
Nexo co-founder Antoni Trenchev expressed relief that the company had reached a settlement in the United States:
“We are content with this unified resolution which unequivocally puts an end to all speculations around Nexo’s relations to the United States. We can now focus on what we do best – build seamless financial solutions for our worldwide audience.”
On January 12, Bulgarian prosecutors began searching Nexo’s Bulgarian offices for alleged involvement in a large-scale money laundering operation as well as violations of Russia’s international sanctions.
Nexo filed its own complaint against the Cayman Islands Monetary Authority on January 16 for putting “too much weight” on regulators’ enforcement operations in its decision to refuse its virtual asset service provider licence.
Since its inception in the Cayman Islands in 2018, Nexo Capital has provided a wide range of trading, borrowing, and lending services to retail and institutional customers in the United States.
Cointelegraph contacted Nexo Capital for further comment, but did not receive an instant answer.