Bulgarian authorities have accused Nexo Capital of allowing customers to use its platform for illegal activities, including money laundering, tax offenses, and financing terrorist activities. Nexo denies these claims.
To make matters worse, the Securities and Exchange Commission (SEC) also charged the company on Thursday with selling unregistered securities. The SEC says that Nexo failed to register with them before offering its lending product, “Earn Interest.”
In order to settle with the SEC, Nexo has agreed to stop offering the interest program and pay a $22.5 million penalty, plus an additional $22.5 million to settle with state regulators.
The Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, stated that the SEC is not concerned with the labels put on offerings but with their economic realities. He emphasized that crypto assets are not exempt from federal securities laws.
The SEC’s filing states that the “Earn Interest” product offered by Nexo did not qualify for an exemption from SEC registration, meaning that Nexo was required to register its offer and sale and failed to do so.
SEC Chair, Gary Gensler, said in the SEC’s announcement that Nexo failed to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors. He added that compliance with the SEC’s policies is not a choice.
Gensler also stated that the SEC will continue to hold crypto companies accountable if they do not comply with the law. In this case, Nexo is ceasing its unregistered lending product for all U.S. investors.
