Cryptolender Nexo receives a fine of 45 million dollars
Cryptocurrency lending firm Nexo was fined $45 million for violating federal securities laws, the Securities and Exchange Commission announced Thursday, the latest in a series of enforcement actions taken by U.S. regulators to crack down on wrongdoing in the crypto industry.
Starting in 2020, Nexo allowed customers in the United States to deposit their savings in cryptocurrency and earn interest on those funds, the SEC said. The agency found that the interest program qualified as a security and that Nexo had not properly registered.
Nexo settled the charges without admitting wrongdoing. The company agreed to pay a $22.5 million fine to the SEC and an additional $22.5 million to pay fees from state regulators.
“We accused Nexo of failing to register its retail crypto lending product before offering it to the public, circumventing essential disclosure requirements designed to protect investors,” SEC Chairman Gary Gensler said in a statement. “Compliance with our time-tested public policies is not a choice.”
A founder of Nexo, Antoni Trenchev, said the company was “pleased with this unified resolution.”
“We can now focus on what we do best – building seamless financial solutions for our worldwide audience,” he added.
Formed in the Cayman Islands in 2018, Nexo is one of a large group of prominent crypto companies that promised to generate interest for customers by investing their crypto savings for them. As of March, Nexo’s fixed-income product had 112,000 U.S. investors, who had committed $2.7 billion in assets, according to court filings. The company promised a return of as much as 12 percent.
In its announcement Thursday, the SEC said Nexo had taken “remedial actions” after the agency settled with another crypto lender in February. The firm voluntarily stopped offering its interest program to new U.S. investors, the agency said, and stopped paying interest on new funds added to existing accounts.
The Nexo fine is the latest effort by US regulators to rein in the crypto industry. After Bahamian-based crypto exchange FTX collapsed in November, the SEC, the Commodity Futures Trading Commission and the Department of Justice filed charges against the company’s founder, Sam Bankman-Fried, accusing him of years of fraud. Two other FTX executives, Caroline Ellison and Gary Wang, have pleaded guilty.
But federal regulators had been scrutinizing crypto lenders since long before FTX’s collapse. Last week, the SEC accused crypto lender Genesis of offering unregistered securities through a product that promised investors high interest rates on deposits. And last year, the agency announced $100 million in fines against BlockFi, a crypto lender that also advertised big returns for customers.
BlockFi filed for bankruptcy in November, largely as a result of its close ties to FTX. Two other crypto lending companies, Voyager Digital and Celsius Network, have also filed for bankruptcy in the past year.
