Nexo Hit with SEC Charges, Settles for $45 Million

Beleaguered crypto firm Nexo has had to pony up a $45 million penalty following charges filed by the Securities and Exchange Commission (SEC). Without admitting or denying the SEC’s findings, Nexo agreed to a cease-and-desist order.

Nexo had previously announced its exit from the United States due to the regulatory environment.

The SEC charged Nexo Capital Inc. with failing to register the offer and sale of its retail crypto asset lending product or its Earn Interest Product (EIP). This is similar to other enforcement actions the Commission has taken, like with BlockFi and the pending charges against Gemini/Genesis.

To settle the SEC’s charges, Nexo has agreed to pay a $22.5 million penalty and cease its unregistered offer and sale of the EIP to U.S. investors. At the same time, Nexo agreed to pay $22.5 million to settle similar charges by state regulators.

SEC Chair Gary Gensler 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. 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.”

The SEC claims that from around June 2020, Nexo began to offer and sell the EIP in the United States. The SEC 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.

The SEC said that it considered remedial actions taken by Nexo, including the company’s cooperation, in determining the settlement.

“We are not concerned with the labels put on offerings, but on their economic realities. And part of that reality is that crypto assets are not exempt from the federal securities laws,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “If you’re offering or selling products that constitute securities under well-established laws and legal precedent, then no matter what you call those products, you’re subject to those laws and we expect compliance.”

It was reported recently that Nexo’s offices in Bulgaria had been raided by law enforcement which had alleged money laundering and other illicit activites.

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