NEW YORK – Cryptocurrency lending firm Nexo was fined US$45 million (S$59.5 million) for violating US securities law, the Securities and Exchange Commission (SEC) announced on Thursday, the latest in a string of enforcement actions that US regulators have taken to crack down on misconduct in the industry.
Starting in 2020, Nexo allowed customers in the United States to hand over their cryptocurrency savings and earn interest on those funds, the SEC said. The agency found that the interest programme qualified as a security, and that Nexo had failed to properly register it.
Nexo settled the charges without admitting wrongdoing. The company agreed to pay a US$22.5 million fine to the SEC and an additional US$22.5 million to settle charges by state regulators.
“We charged Nexo with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” SEC chair Gary Gensler said in a statement. “Compliance with our time-tested public policies isn’t a choice.”
Nexo, which was formed in the Cayman Islands in 2018, is one of a large group of prominent crypto companies that promised to generate interest for customers by investing their crypto savings for them. As at March, Nexo’s interest product had 112,000 US investors, who had put in US$2.7 billion in assets, according to court documents. The company promised returns as high as 12 per cent.
Last week, the SEC charged crypto lender Genesis with offering unregistered securities through a product that also promised investors high interest on deposits.
In its announcement on Thursday, the SEC said Nexo had taken “remedial acts” after the agency settled with another crypto lender in February. The company voluntarily stopped offering its interest programme to new US investors, the agency said, and ceased paying interest on new funds added to existing accounts.
The Nexo fine is the latest effort by US regulators to rein in the crypto industry. After crypto exchange FTX collapsed in November, charges were filed against its founder, Sam Bankman-Fried, accusing him of years of fraud. Two other FTX executives, Caroline Ellison and Gary Wang, have pleaded guilty to criminal charges.
But federal regulators had been scrutinising crypto lenders since long before FTX’s collapse. Last year, the agency announced US$100 million in penalties against BlockFi, a crypto lender that also advertised big returns for customers.
BlockFi filed for bankruptcy in November largely as a result of its close ties to FTX. Two other crypto lending companies, Voyager Digital and Celsius Network, have also filed for bankruptcy in the past year. NYTIMES
