Cryptocurrency lending platform Nexo was engaged in drawn-out a dialogue with US regulators that saw it eventually decide to leave the US market. But that didn’t mean its legal woes were over. 

On Thursday, the SEC charged Nexo with failing to register its Earn Interest Product (EIP), which promised investors annual interest of as much as 20%.

In response, Nexo has agreed to stop offering the product and will pay a $45 million settlement. 

The SEC alleged that Nexo began offering the product in the US around June 2020, and the firm used customers’ cryptoassets, in part, to make interest payments to other investors. By September, the lender faced several cease-and-desist actions by eight state regulators including California, New York and Washington.

Eventually, in December, Nexo said it would wind down its US operations after hitting a “dead end” in attempts to gain clarity from dialogue with US regulators. 

According to the SEC, Nexo’s product should have been registered as it considers the EIP a “security” and therefore wasn’t exempt from the registration process.

“The order finds that the EIP is a security and that the offer and sale of the EIP did not qualify for an exemption from SEC registration. Therefore, Nexo was required to register its offer and sale of the EIP, which it failed to do,” it said.

SEC Chair Gary Gensler said compliance with the agency’s policies isn’t a choice. “Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable,” he said.

In its blog published on Thursday, Nexo said the settlement was made on a no-admit-no-deny basis, meaning the firm is allowed to pay up without admitting to the SEC’s allegations.

“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,” said Nexo co-founder Antoni Trenchev.

Thursday’s settlement only added to the lender’s headaches.

Earlier this week, Nexo’s local offices in Bulgaria were raided by officials for alleged money laundering, tax evasion and fraud. The investigations were reportedly carried out as part of a broader probe focused on international financial sanctions against Russia. 

“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,” Nexo co-founder Kosta Kantchev said.


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