Securities and Exchange Commission (SEC) officials have outlined charges and a settlement agreement regarding Nexo Capital Inc., alleging an unregistered offering of its Earn Interest Product (EIP).
The SEC alleged Nexo Capital Inc. failed to register the offer and sale of its retail crypto asset lending product and indicated Nexo Capital Inc. agreed to a cease-and-desist order prohibiting it from violating the registration provisions of the Securities Act of 1933 without admitting or denying the SEC’s findings.
According to the SEC, to settle the agency’s charges, Nexo Capital, Inc. agreed to pay a $22.5 million penalty and cease its unregistered offer and sale of the EIP to U.S. investors while also reaching an agreement to pay an additional $22.5 million in fines to settle similar charges by state regulatory authorities.
“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. “Compliance with our time-tested public 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. In this case, among other actions, Nexo is ceasing its unregistered lending product to all U.S. investors.”
SEC Division of Enforcement Director Gurbir S. Grewal said the agency is not concerned with labels put on offerings but on their economic realities.
“And part of that reality is that crypto assets are not exempt from the federal securities laws,” he said. “If you’re offering or selling products that constitute securities under well-established laws and legal precedent, then no matter what you call those products, you’re subject to those laws, and we expect compliance.”