Nexo pays $45M in fines and settles with US authorities.

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

Today we have Nexo Capital Inc. accused of failing to register the offer and sale of its retail crypto-asset lending product, Earn Interest Product (EIP). To settle the charges, Nexo agreed to pay $22.5 million and cease its unregistered offering and sale of EIP to U.S. investors.

$22.5 million fine for selling EIP to US investors. Additionally, $22 million in fines will go toward settling claims with state regulatory authorities. SEC Chairman, Gary Gensler, reinforces that crypto organizations must comply with their own policies. Failure to do so would allow the SEC to hold defaulters accountable.

What is EIP and why the penalty?

As of June 2020, Nexo has been marketing and selling its Earned Interest Product (EIP) in the US. Nexo works because it lends money to its customers, and the interest becomes its main source of income. Nexo uses this interest income to pay more interest on its loans. However, several states in the USA alleged that Nexo’s interest-to-earn service was not registered as a security.

As a result, the states of California, Oklahoma, Vermont, South Carolina, Kentucky, and Maryland took the company to court. They sought an order to cease and desist the company’s EIP service.

gave SEC order Says Nexo used its EIP service for interest payments and funneled it into its other businesses. Additionally, the SEC holds Nexo at fault because their EIP security fails to meet the regulatory authority’s exemption requirements.

While Nexo has agreed to pay the fine and stop the EIP service, they have not confirmed the allegations. In response to the fine, Nexo also published one. Settlement tweet By confirming that they agree to the non-recognition settlement.

Further, Nexo co-founder Antoni Trenchev says,

We are pleased with the unanimous resolution which unequivocally ends all speculation about Nexo’s relationship with the US. Now we can focus on what we do best – creating seamless financial solutions for our worldwide audience.

The SEC is becoming more vigilant and strict.

Noting some of the SEC’s previous actions on crypto companies, it can be said that it is tightening the noose. In February 2022, SEC Fines BlockFi $100 Million for its unregistered securities offering. The BlockFi fine served as a warning to several other crypto firms offering similar products.

Oh Cornerstone Research Explores several actions in which the SEC holds crypto companies accountable for their services, solutions and actions. In 2022, there were more than 30 such enforcement actions led by Gary Gensler. Like the Nexo case, The SEC also charged Gemini. for its unregistered service in the form of sale of securities.

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