Cryptocurrency lending platform Nexo has reached an agreement with the US Securities and Exchange Commission (SEC). According to the clauses of the agreement, the company agrees to pay a total of US$ 45 million in fines, or R$ 229 million at the current exchange rate. According to the SEC, the fine relates to the company’s Earn Interest Product (EIP). The SEC claims that Nexo is not authorized to offer the product to investors residing in the United States. As a result, Nexo has also agreed that it will shut down EIP operations in the US. However, the company did not contest the SEC’s allegations, it only agreed to pay the fine and not offer the EIP in the US.
fine in two parts
According to the decision, Nexo will pay the fine in two parts. Half of the amount (US$ 22.5 million) corresponds to the amount of the fine itself. The other half (US$ 22.5 million) corresponds to fees to settle similar charges by regulatory authorities. According to the SEC, Nexo started offering its EIP product around June 2020. The service works like an investment account: it allows US investors to leave their digital assets in custody at Nexo. In exchange, the company made a promise to pay interest on the amount. The interest income part was the problem, since this type of investment is configured as a security offer. Therefore, Nexo should have SEC authorization to market EIP – something the company never applied for. Another problem, according to the municipality, is that Nex used investors’ cryptocurrencies in different ways. In this way, Nexo generated revenue for its own business, in addition to financing interest payments to EIP investors.
Nexo’s EIP is a security
In its filing, the SEC noted that such use of the EIP by Nexo constitutes a security. The securities regulator added that Nexo failed to register its offer and sale of the EIP. “We accuse Nexo of failing to register its retail crypto lending product before offering it to the public, circumventing essential disclosure requirements designed to protect investors. Compliance with our time-tested public policies is not a choice,” said SEC Chairman Gary Gensler. Last month, Nexo announced its withdrawal from the US market as it decided to cut access to the EIP immediately. That is, the SEC’s decision only confirmed something that was apparently in the company’s plans. Gensler took advantage of the case to launch a warning about cryptocurrency companies and also confirm the end of the EIP. “Where crypto companies fail to comply, we will continue to follow the facts and the law to hold them accountable. In this case, among other actions, Nexo is terminating its unregistered lending product for all US investors.” Recently, Nexo was involved in possible accusations of involvement with illegal activities, as reported by CriptoFácil. The company would have collaborated with money laundering for terrorists and also for the famous “queen of Bitcoins” Ruja Ignatova, leader of the financial pyramid OneCoin.