The cryptocurrency lending firm Nexo was fined $45 million for violating federal securities law, the Securities and Exchange Commission announced on Thursday, the latest in a string of enforcement actions that U.S. regulators have taken to crack down on misconduct in the crypto industry.
Starting in 2020, Nexo allowed customers in the United States to hand over their cryptocurrency savings and earn interest on those funds, the S.E.C. said. The agency found that the interest program qualified as a security, and that Nexo had failed to properly register.
Nexo settled the charges without admitting wrongdoing. The company agreed to pay a $22.5 million fine to the S.E.C. and an additional $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,” Gary Gensler, the S.E.C. chair, said in a statement. “Compliance with our time-tested public policies isn’t a choice.”
A founder of Nexo, Antoni Trenchev, said the company was “content with this unified resolution.”
“We can now focus on what we do best — build seamless financial solutions for our worldwide audience,” he added.
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 of March, Nexo’s interest product had 112,000 U.S. investors, who had put in $2.7 billion in assets, according to court documents. The company promised returns as high as 12 percent.
In its announcement on Thursday, the S.E.C. said Nexo had taken “remedial acts” after the agency settled with another crypto lender in February. The firm voluntarily stopped offering its interest program to new U.S. investors, the agency said, and ceased paying interest on new funds added to existing accounts.
The Nexo fine is the latest effort by U.S. regulators to rein in the crypto industry. After the Bahamian-based crypto exchange FTX collapsed in November, the S.E.C., the Commodity Futures Trading Commission and the Justice Department filed charges against the company’s 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 scrutinizing crypto lenders since long before FTX’s collapse. Last week, the S.E.C. charged the crypto lender Genesis with offering unregistered securities through a product that promised investors high interest on deposits. And last year, the agency announced $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 last year.
