The Securities and Exchange Commission announced on Thursday charging crypto company Nexo Capital Inc. with failure to register its retail crypto asset lending product, the Earn Interest Product (EIP).
Nexo has agreed to pay a $22.5 million penalty to settle the charges and stop offering and selling the product in question to US investors. Additionally, Nexo has agreed to pay fines in the amount of $22.5 million to settle charges with North American Securities Administrators Association (NASAA).
SEC alleges that Nexo began to offer and sell EIP in the US around June 2020. Through the product, US investors gave their money to Nexo with the promise of interest.
The regulator stated:
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 SEC has determined that the EIP is a security and Nexo should have registered it as such.
In its agreement with Nexo, the US watchdog pointed out that the crypto company has cooperated with the staff. Furthermore, Nexo announced in December it will cease the offer and sale of EIP in certain states and is phasing out of products and services in the US.
Nexo released a statement regarding the resolution with the US regulators, calling it “landmark” and highlighting that the they did not allege the company engaged in any fraud.
Antoni Trenchev, Co-founder of Nexo commented:
Antoni Trenchev Source: LinkedIn
We are content with this unified resolution which unequivocally puts an end to all speculations around Nexo’s relations to the United States. We can now focus on what we do best – build seamless financial solutions for our worldwide audience.
Kosta Kantchev, Co-founder of Nexo, added:
Kosta Kantchev Source: LinkedIn
We are confident that a clearer regulatory landscape will emerge soon, and companies like Nexo will be able to offer value-creating products in the United States in a compliant manner, and the U.S. will further solidify its position as the world’s engine of innovation.
Earlier last week, Bulgaria took action against Nexo cryptobank for financial violations citing ongoing investigations into the actions of an organized criminal group, money laundering, tax crimes, banking without a license and computer fraud. The Bulgarian authorities raided offices in the company in the capital city Sofia. The crypto lender denied the allegations, saying that they have taken preventive measures against money laundering.
The company tweeted:
Unfortunately, with the recent regulatory crackdown on crypto, some regulators have recently adopted the kick first, ask questions later approach. In corrupt countries, it is bordering with racketeering, but that too shall pass.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.