SEC Fines Nexo $45 Million for Unregistered Crypto Asset Offerings

• The US Securities and Exchange Commission (SEC) has levied a $45 million fine on Nexo Capital Inc. for failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP).
• To settle the charges, Nexo agreed to pay $22.5 million and cease its unregistered offer and sale of the EIP to US investors.
• The SEC Chairman, Gary Gensler, has reinforced that crypto organizations must comply with its policies, or face the consequences for failing to do so.

The US Securities and Exchange Commission (SEC) recently levied a hefty $45 million fine on Nexo Capital Inc. for failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). The SEC order states that Nexo used the EIP service to fund interest payments and injunctions, making it a security.

According to the SEC, Nexo had offered and sold the EIP to US investors without registering it as a security, thus violating federal securities laws. To settle the charges, Nexo agreed to pay $22.5 million and cease its unregistered offer and sale of the EIP to US investors. The SEC has also stated that $22 million of the fine will be paid to State Regulatory Authorities for settling the claims made by them.

SEC Chairman Gary Gensler has commented on the matter by reinforcing that crypto organizations must comply with its policies, or face the consequences for failing to do so. He stated, “This action underscores the importance of crypto companies adhering to securities laws and the SEC’s registration requirements.”

The SEC began investigating Nexo in June 2020 after several states in the USA filed for a cease-and-desist order on the company’s EIP service. These states included California, Oklahoma, Vermont, South Carolina, Kentucky, and Maryland, who all alleged that Nexo’s earn-interest service was not registered as a Security.

The SEC order also noted that Nexo had misled investors by suggesting that the EIP was a safe investment, when in fact it was not. The SEC has further warned other crypto companies and investors to be aware of the risks associated with investing in unregistered securities.

The hefty $45 million fine imposed on Nexo is a reminder of the SEC’s commitment to enforcing its regulations and protecting investors from potential fraud and abuse. It is also a warning to all crypto companies to ensure that they comply with the SEC’s regulations and registration requirements.

Investing in unregistered securities carries a significant amount of risk, and investors should always be aware of the potential consequences of such investments. The SEC’s enforcement action against Nexo is a good reminder of the importance of adhering to the SEC’s laws and regulations.