Cryptocurrency platform penalized $45 million for illicit activities

STATEN ISLAND, N.Y. — U.S. government entities announced on Thursday one of the latest efforts against a cryptocurrency platform that could see the entity lose as much as $45 million.

Attorney General Letitia James’ office announced the action against Nexo Inc. and Nexo Capital Inc. for its role in engaging in the unregistered offer and sale of securities and commodities, and for lying to investors about their registration status.

“Cryptocurrency companies are unreliable and shady, but they are not immune from accountability,” James said. “Nexo ignored repeated warnings by my office to register and today they are paying the price for their wrongdoing. The days of crypto companies acting like the rules do not apply to them are ending.”

The agreement targets Nexo for its unregistered offer and sale of securities in the form of an interest-bearing virtual currency account called the Earn Interest Product (EIP). Spokespersons for Nexo did not respond to a request for comment by the time of publication.

Joining James in a $22.5 million agreement were California, Indiana, Kentucky, Maryland, Oklahoma, South Carolina, Vermont, Washington, and Wisconsin, according to her office, which also secured a separate $1.5 million settlement for the company’s unregistered purchase and sale of securities and commodities through a virtual currency trading platform called the Nexo Exchange.

The U.S. Securities and Exchange Commission (SEC) also announced a separate settlement in which Nexo agreed to pay an additional $22.5 million and cease the offer and sale of variable-rate EIP accounts in the United States.

In addition to the monetary damages, stipulations in the agreements with Nexo include a five-year ban on Nexo offering or selling securities in New York, and a requirement that Nexo notify all remaining U.S. investors to withdraw their virtual assets from Nexo’s platform by April 1, 2023.

SEC Chair Gary Gensler said the settlements will mean that Nexo’s unregistered lending product are no longer available to U.S. citizens.

“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,” 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.”