• Crypto lending company Nexo has agreed to pay a total of $45 million to United States regulators to settle claims that it failed to register the sale of its Earn Interest Product (EIP).
• This settlement requires Nexo to cease its offer and sale of the EIP to U.S. investors.
• The SEC claims the product is a security and thus Nexo should have registered with the agency.
Crypto lending company Nexo recently agreed to pay a total of $45 million to US regulators in a settlement for failing to register the sale of its Earn Interest Product (EIP). This settlement requires Nexo to cease its offer and sale of the EIP to US investors and pay a $22.5 million penalty to each of the two regulators, the US Securities and Exchange Commission and the North American Securities Administrators Association.
The SEC claims that the product is a security and, as such, Nexo should have registered with the agency. Gurbir Grewal, Director of the SEC’s Division of Enforcement, commented on this, saying: “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. 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.”
Nexo is a British digital asset lending company that loans out client funds and uses the proceeds to pay interest. The company first faced legal action from US officials in September 2022 when several states, including California, Vermont, Oklahoma, South Carolina, Kentucky, and Maryland, filed cease-and-desist orders against the company.
Nexo’s Earn Interest Product (EIP) was first offered to US customers in June 2020 and allowed users to tender their crypto assets in exchange for industry-high interest rates. This product is now prohibited for US customers as a part of the settlement.
The settlement is a reminder to crypto companies that they must register any products that constitute securities under well-established laws with the appropriate regulatory agencies in order to remain compliant. Nexo is now working to ensure that it is compliant with all relevant regulations in the US and other countries.