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Seeking Alpha 2023-01-19 22:40:07

Crypto lender Nexo to pay $45M penalty for unregistered sale of asset lending product

Cryptocurrency lender Nexo has agreed to pay $45M in regulatory penalties for failing to register the offer and sale of one of its retail crypto asset lending products, the U.S. Securities and Exchange Commission (SEC) said on Thursday. According to the SEC, Nexo began to offer and sell the product, called the Earn Interest Product (EIP), in the U.S. in or around June 2020. The EIP allowed investors to tender their crypto assets to Nexo in return for Nexo's promise to pay interest. As per the SEC's order, Nexo allegedly exercised its discretion to use investors' crypto assets to make money for its own business and to fund interest payments to EIP investors. “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 in a statement . Without admitting or denying the SEC's finding, Nexo agreed to pay a $22.5M penalty and cease its offer and sale of the EIP to U.S. investors. The lender will also pay an additional $22.5M to settle similar charges by state regulatory authorities. Last week, Reuters reported that Bulgarian prosecutors had launched an investigation into alleged illegal activities conducted by Nexo. In Nov. 2022, Nexo reportedly had proposed to acquire rival BlockFi for about $850M. BlockFi eventually ended up filing for bankruptcy.

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