Crypto firm Nexo Capital agrees to pay $45 million to settle U.S. SEC, state charges

FILE PHOTO: People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly

NEW YORK (Reuters) -Nexo Capital Inc has agreed to pay $45 million in penalties to settle charges from the U.S. Securities and Exchange Commission (SEC) and state regulators that the crypto firm failed to register its crypto asset lending product, the SEC said on Thursday.

Nexo has agreed to pay a $22.5 million penalty to the SEC and another $22.5 million in fines to state regulators in relation to its Earn Interest Product to U.S. investors, the SEC said in a statement.

Nexo began to offer its lending product around June 2020, allowing U.S. investors to give their crypto assets to the company in exchange for a promise of interest, the SEC said. The company ceased offering the product to new investors after the SEC announced similar charges against another company in February 2022.

Nexo, which did not admit or deny the SEC's findings, said it was "content" with the resolution. Its co-founder Kosta Kantchev added: "We are confident that a clearer regulatory landscape will emerge soon, and companies like Nexo will be able to offer value-creating products in the United States in a compliant manner."

The UK-based crypto lender said last month it would phase out its U.S. products and services over the coming months due to clashes with regulators.

The SEC has been targeting such offerings by crypto firms over the last year, bringing its first charges against a subsidiary of BlockFi Inc for selling a similar product in February 2022.

Last week, the SEC sued Genesis Global Capital LLC and Gemini Trust Company LLC for their lending product.

Nexo is struggling with authorities elsewhere. Last week, Bulgarian prosecutors charged four people as part of an investigation into the company. Authorities raided more than 15 of the company’s sites on Jan. 12 in the capital Sofia, saying they were investigating the establishment of an organized crime group, tax crimes, money laundering, banking activity without a license and computer fraud.

The company confirmed that Bulgarian authorities were at one of its offices, but claimed the entity only housed operational expense-related functions, like payroll and customer support.

(Reporting by Chris PrenticeAdditional reporting by Hannah Lang in Washington and Jonathan Stempel in New YorkEditing by Matthew Lewis and Josie Kao)

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