Nexo Agrees to Halt Crypto Lending Product, Pays $45M in Penalties
Nexo Capital has had a rough week. On Monday, Bulgarian authorities claimed they had proof that Nexo users were using the platform for unlawful activities like money laundering, funding terrorists, and tax-related offenses. The crypto lender, however, denies the claims.
Nexo got into further trouble on Thursday when the Securities and Exchange Commission (SEC) leveled more charges against the crypto lender for failing to register with the commission its crypto lending product called ‘Earn Interest’. That said, the agency accuses Nexo of offering unregistered securities.
In settling with the regulator, the crypto lender has agreed to end offering its interest program and pay penalties amounting to $45 million. Director of the SEC’s Enforcement Division Gurrbir Grewal reiterated the commission’s statement that cryptos are not exempt from securities laws.
In a statement, Grewal noted that SEC was only concerned with the economic fundamentals of the offerings rather than the titles given to them. He added that as long as you offer a digital asset that constitutes securities, the commission expects you to comply with the stipulated laws.
SEC Labels Nexo’s ‘Earn Interest’ Product an Unregistered Security
The SEC filing classifies Nexo’s Earn Interest product as a security; therefore, it qualified to be registered with the commission, an obligation the crypto lender failed to fulfill. Moreover, in the SEC’s announcement, the commission’s Chairman, Gary Gensler, insisted that compliance with established policies wasn’t a choice.
Nexo launched its Earn Interest product in 2020. However, it started facing backlash last September from several US states, including Vermont, Kentucky, Oklahoma, Maryland, and South Carolina, who filed cease and desist orders against the firm, calling the Nexo’s offering an unregistered security.
Nexo Plans to Exit the US Market
Regulators worldwide have doubled their enforcement efforts following the collapse of multiple crypto companies, including FTX and Celsius. Last December, Nexo announced that it was shutting down its US operations due to constant frustrations by the regulators.
At that time, Nexo released a public announcement calling out the US regulators for not providing a clear regulatory framework that promotes blockchain businesses. Nonetheless, the crypto lender said it would continue to focus on delivering financial solutions to its global audience.
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