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Nexo pays $45 million in penalties and settles with US authorities

The US Securities and Exchange Commission (SEC) has fined Nexo Capital Inc. $45 million. The SEC explains the reason for the fine in a tweet,

Today we indicted Nexo Capital Inc. for failing to register the offering and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle the fees, Nexo agreed to pay $22.5 million and cease its unregistered offering and sale of the EIP to US investors.

The $22.5 million fine for selling EIP to US investors. In addition, the $22 million fine will be slacked off by state regulators settling claims. SEC Chairman Gary Gensler reiterates that crypto organizations must comply with their policies. Otherwise, the SEC can hold debtors accountable.

What is EIP and why the fine?

As of June 2020, Nexo markets and sells its Earn Interest Product (EIP) in the United States. Nexo works by lending money to its customers and interest becomes its main source of income. Nexo uses this interest income to continue paying interest on its loans. However, several states in the US claimed that Nexo’s interest income service was not registered as a security.

Nexo pays $45 million in penalties and settles with US authorities, Crypto Trading News

The states of California, Oklahoma, Vermont, South Carolina, Kentucky and Maryland then sued the company. They asked for a cease and desist order on the company’s EIP service.

the SEC order says Nexo used its EIP service to fund interest payments and feed them into its other businesses. In addition, the SEC holds Nexo responsible because its EIP security does not meet the requirements for an exemption from the regulatory authority.

Today we indicted Nexo Capital Inc. for failing to register the offering and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle the fees, Nexo agreed to pay $22.5 million and cease its unregistered offering and sale of the EIP to US investors.

— U.S. Securities and Exchange Commission (@SECGov) January 19, 2023

Although Nexo agreed to pay the fine and stop the EIP service, they have not confirmed the allegations. In response to the penalty, Nexo also released a settlement tweet Confirmation that they agree to a no-admit, no-deny agreement.

Nexo has reached a final landmark resolution with the US Securities and Exchange Commission (SEC), the North American Securities Administrators Association (NASAA), comprised of all 50 US states and 3 territories, and the Attorney General of New York.🧵

— Nexo (@Nexo) January 19, 2023

Additionally, Antoni Trenchev, co-founder of Nexo says:

We are pleased with this unified resolution, which puts a clear end to all speculation about Nexo’s relationship with the United States. We can now focus on what we do best – building seamless financial solutions for our global audience.

The SEC is becoming more vigilant and stricter

Considering some of the SEC’s previous actions against crypto companies, it can be said that it is tightening the noose. In February 2022, the SEC fined BlockFi $100 million for its unregistered securities offerings. The BlockFi penalty served as a warning for several other crypto firms offering similar products.

A cornerstone research finds multiple cases in which the SEC holds crypto companies accountable for their services, solutions, and actions. Over 30 such enforcement proceedings were conducted in 2022 under the presidency of Gary Gensler The SEC has also indicted Gemini for its unregistered securities sales service.

Nexo pays $45 million in penalties and settles with US authorities, Crypto Trading NewsBitcoin was priced at $21,158 on the one-day chart | Source: BTCUSDT on TradingView Featured image by UnSplash, chart by TradingView.com

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