Nexo Settles Charges by US Regulator, Agrees to Pay $45 Million in Fines

Crypto lender Nexo has reached an agreement with the US Securities and Exchange Commission to pay a total of $45 million in fines and to stop offering and selling its retail crypto asset lending product to US investors, the regulator announced on Thursday.

Nexo Capital Inc. was charged with failing to register the offer and sale of its Earn Interest Product (EIP), which it introduced on the US market in 2020. Through it, it allowed investors to make deposits in cryptocurrency and earn interest on these funds. The company used clients’ crypto assets in different ways in order to generate income and to fund the interest payments to EIP investors, the Securities and Exchange Commission (SEC) explains in a statement.

However, SEC considers the EIP product a security, which requires proper registration as per federal securities law. Failing to register, Nexo has violated the law, SEC says, a conclusion shared by several state securities regulators, as well. In its agreement, the company has not admitted any wrongdoing but has agreed to pay a $25.5 million penalty to SEC and another $25.5 in fines to settle similar charges by state regulatory authorities.

Nexo is the latest crypto company to be investigated by authorities in the US after the second-largest cryptocurrency exchange in the world FTX collapsed and its owner Sam Bankman-Fried was charged with fraud. As BestBrokers reported last week, Nexo’s offices in Sofia were raided by police on January 12 as part of a large-scale investigation by several Bulgarian agencies.

Prosecutors in Sofia charged four individuals with fraud and being part of an organized crime group, among others. Two were arrested and later released on bail of $1 million each, while search warrants were issued against the other two.

Soon after the settlement with SEC was announced, Nexo co-founder Antony Trenchev tweeted details about the agreement.

The settlements are on a no-admit-no-deny basis. The sole allegation has been that Nexo’s Earn Interest Product (EIP) was an unregistered securities offering. It closes all multi-year-long inquiries about Nexo.

The U.S. Federal Regulators do not contend that Nexo engaged in any fraud, or misleading business practices, or that any Nexo customers have been harmed or misled about Nexo’s financial health.

We thank the commissioners for their time, effort, and dedication in doing what they believe is in their constituents’ best interests and in line with the American values of transparency, financial freedom, and adherence to the highest professional and legal standards.

Nexo thrived in every downturn and is one of the few companies to emerge unscathed from the 2022 round of bankruptcies that shook our industry. How? By adhering to stringent risk management and complying with our regulatory and KYC/AML/CTF obligations from day 1.

Five years after Nexo’s founding and two years after our work with US regulators began, I can proudly say that this settlement fully reflects our uncompromising values and shows that Nexo and its state-of-the-art products are not a problem but part of the solution.