Nexo settles a 45 million fine with the SEC

Nexo to Pay $45 Million settlement with the SEC

Jan 23, 2023
Read in 3 mins

The company settled with the SEC for a $45 million penalty, suspending the "earn" program following allegations that it sold "unregistered securities".

The Securities and Exchange Commission (SEC) charged U.K. crypto lender Nexo with failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP).

According to the statement from the SEC, Nexo agreed to pay a $22.5 million penalty and cease its unregistered offer and sale of the EIP to U.S. investors. Also, Nexo agreed to pay an additional $22.5 million in fines to settle similar charges by state regulatory authorities.

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,” said SEC Chair Gary Gensler. “Compliance with our time-tested public policies isn’t a choice. Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable. In this case, among other actions, Nexo is ceasing its unregistered lending product as to all U.S. investors.”

Around June 2020, Nexo began to offer and sell the EIP in the United States. The EIP allowed U.S. investors to tender their crypto assets to Nexo in exchange for Nexo’s promise to pay interest. The SEC’s order states that Nexo marketed the EIP as a means for investors to earn interest on their crypto assets, and Nexo exercised its discretion to use investors’ crypto assets in various ways to generate income for its own business and to fund interest payments to EIP investors. The order finds that the EIP is a security and that the offer and sale of the EIP did not qualify for an exemption from SEC registration. Therefore, Nexo was required to register its offer and sale of the EIP, which it failed to do.

In agreeing to settle with Nexo, the Commission considered remedial acts promptly undertaken by the company and the company’s cooperation with Commission staff. Specifically, the SEC’s order notes that, after the Commission announced charges involving a similar crypto investment product in February 2022, Nexo voluntarily ceased offering the EIP to new U.S. investors and ceased paying interest on new funds added to existing EIP accounts of U.S. investors. Further, the order states that Nexo announced in December that it was ceasing the EIP in certain states and phasing out all of its products and services in the United States, including permanently ceasing to offer the EIP to all U.S. investors.

The SEC stated that in the settlement negotiations, the Commission took into consideration “remedial acts promptly undertaken by the company and the company’s cooperation with Commission staff” in addressing their shortfalls.

cool.svg cool_white.svg COOL!
notbad.svg notbad_white.svg NOT BAD!
notcool.svg notcool_white.svg NOT COOL!