Nexo Capital has recently reached a settlement with the U.S. Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) regarding the sales of some digital asset lending products.
Over 1,400 Individuals Invested In Nexo’s Offering
According to the regulators’ claims, Nexo sold unregistered securities across the U.S. and neglected to reveal important information concerning these investments to the buyers. In Oregon, over 1,400 individuals invested about $11 million with Nexo.
Meanwhile, Nexo is currently resolving the issue with 50 U.S. states and other securities regulators in North America, agreeing to pay $25 million. As part of this settlement, the Oregon Division of Financial Regulation (DFR) will receive $424,528.30 through a payment schedule, with the last installment due on November 20th, 2023.
Of the entire amount, a little over 10% of it will be allocated to the financial education account of the DFR. Over the previous year, a working group consisting of state regulators thoroughly investigated Nexo’s purported sale and offering of unregistered securities through its Earned Interest Product (EIP).
The EIP involved investors depositing their digital assets with the crypto firm in exchange for guaranteed rates of return. Notably, several state regulators have accepted the settlement terms offered by Nexo to address its prior unregistered activities, and other jurisdictions would likely do the same.
Established in 2018, Nexo is a corporation headquartered in the Cayman Islands that offers crypto-related financial services to institutional and retail borrowers in the United States. The services offered include lending, borrowing, and crypto trading.
During the investigation, the regulators uncovered that EIP buyers could earn interest on their digital assets passively by lending them to Nexo. However, Nexo possessed full discretion over the revenue-generating actions utilized to obtain returns for investors.
Through its website and social media platforms, the company offered and advertised the EIP and other products to investors in the United States, implying that investors could receive up to 36% returns in some cases.
DFR To Protect The Rights Of Oregonians
In addition, Nexo did not fulfill state registration obligations, which caused investors to purchase unregistered securities and breached state regulations. Additionally, the crypto lender did not provide investors with important information and disclosures that would have helped them understand the possible risks associated with the EIP.
TK Keen, a DFR administrator, stated, “all financial services firms, including newly established businesses that provide services related to crypto assets, must adhere to Oregon’s laws safeguarding investors.” Keen added that working alongside NASAA and other state agencies, the division remains dedicated to safeguarding the retirement savings investments of Oregonians and guaranteeing that businesses operating within Oregon do so lawfully.
According to the DFR administrator, cryptocurrencies and associated investments are usually unstable products with heightened risks. He advised investors to thoroughly examine an entity’s disclosures, which may include extensive fine print, to comprehend the potential risks entirely.
This emphasizes the significance of consumers having the chance to review such materials.