Crypto lender Nexo Capital has agreed to pay $45 million in fines to the US Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) for failing to register the offering and sell the earned interest product (EIP).
The news has been announced before SEC And NASA In two separate statements on January 19. According to a statement from the Securities and Exchange Commission, Nexo has agreed to pay a $22.5 million fine, cease its unregistered offering, and sell its EIP to US investors. An additional $22.5 million will be paid in fines to settle similar charges by state regulatory authorities.
Nexo has been cleared of any fraudulent business practices by the Federal Reserve Bank
In its statement, NASA said the settlement follows, in principle, investigations into the alleged Nexo offering and securities sale following the past year of investigations. “During the investigation, it was discovered that EIP investors could earn passive interest on digital assets by lending those assets to Nexo.”
“Nexo maintained total discretion over the revenue-generating activities utilized to earn returns for investors. The company offered and promoted the EIP and other products to investors in the U.S. via its website and social media channels suggesting in some instances that investors could obtain returns as high as 36%,” NASAA stated.
In a Jan. 19 tweet, Nexo tweeted to its 288,600 followers that they had reached a final final decision with the SEC and NASAA. The statement further clarified that US federal regulators have not alleged that the company has engaged in any fraud or deceptive business practices.
The SEC stated that in its settlement negotiations, the committee took into account the level of cooperation and immediate remedial actions Nexo took to address its deficiencies.
President of the Supreme Education Council Gary Gensler He said:
“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."
Gensler went on to say, “Compliance with our time-tested public policies is not an option. 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 discontinuing its unregistered lending product for all US investors.”
While the company has neither admitted nor denied the findings of the SEC investigation, the Nexo settlement came on the back of a cease and desist order preventing the company from violating any provisions of the Securities Act of 1933.
NASA explained that the investigation was conducted by at least 17 government securities regulators, who agreed to the terms laid out in the settlement.
The regulatory compliance issues faced by crypto companies in the US are important because they serve as a reminder that they are subject to the same laws as traditional financial institutions. Scrutiny and oversight of crypto companies by regulators is only set to increase and other crypto companies may need to review their compliance practices.