site.btaNexo Agrees to USD 45 Mln Settlement with US Securities and Exchange Commission
The US Securities and Exchange Commission (SEC) said Thursday it has charged Nexo Capital Inc. with failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle the SEC’s charges, Nexo agreed to pay a USD 22.5 million penalty and cease its unregistered offer and sale of the EIP to US investors. Nexo has also agreed to pay an additional USD 22.5 million in fines to settle similar charges by state regulatory authorities, SEC further said.
According to the SEC’s order, in or around June 2020, Nexo began to offer and sell the EIP in the United States. The EIP allowed US investors to tender their crypto assets to Nexo in exchange for Nexo’s promise to pay interest. The 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.
Nexo said on Twitter that it has reached a final landmark resolution with SEC, the North American Securities Administrators Association, consisting of all 50 U.S. States & 3 territories and the Attorney General of New York. The company described the characteristics of the settlement with US federal regulators as being on a no-admit-no-deny basis. The sole allegation was that Nexo’s EIP was an unregistered securities offering. This closes all multi-year-long inquiries into Nexo, the company said, adding that the US 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.
Last week, the Bulgarian prosecution service announced a highly publicized international operation against an organized crime group for financial instrument fraud. Searches and seizures were carried out at the cryptocurrency platform's office in Bulgaria.