Crypto Lender Nexo Agrees to Pay $45 Million to Settle Regulatory Investigations

Nexo settled the SEC’s investigation without admitting or denying wrongdoing, and agreed to pay half of the $45 million fine to the federal agency and half to a group of states that had already sued it. The SEC last week sued crypto lender

Genesis

Global Capital LLC, alleging its crypto-lending program is a security that should have followed federal rules.

Nexo agreed with the SEC to stop offering the program to American investors, and had already decided in December to start phasing it out in the U.S., the SEC said. A group of states including California and New York sued Nexo in September over the same claims the SEC alleged on Thursday.

The company settled with 17 states on Thursday, according to the North American Securities Administrators Association.

The company said in a statement that it was content with the resolutions. “We can now focus on what we do best—build seamless financial solutions for our worldwide audience,” said Nexo co-founder

Antoni Trenchev.

The SEC says many digital assets and cryptocurrencies are securities, meaning they should be sold to the public only after complying with federal investor-protection rules. That typically involves filing financial statements and other business disclosures with the agency, which makes them available to investors. 

Genesis and another crypto company sued by the SEC, Gemini Trust Company LLC, are fighting the SEC’s claims in Manhattan federal court. Gemini’s co-founder Tyler Winklevoss has called the SEC’s lawsuit a “manufactured parking ticket.” 

Genesis is preparing to file for bankruptcy within days, according to people familiar with the matter. 

London-based Nexo, which offers lending and trading services, has about $2.2 billion in assets under management, according to an attestation by accounting firm Armanino LLP. 

The company’s office in Sofia, Bulgaria, was raided by the local police last Thursday as part of a probe into suspected money laundering and tax crimes. Nexo said it doesn’t offer services in Bulgaria and would take “all actions permitted by the law to protect our employees and the company itself from the outrageous liberties taken by the authorities.”

Nexo launched its U.S. business in 2020, according to the SEC, and by March 2022 had grown to claim $2.7 billion in assets and 112,000 U.S. clients. The company took digital-asset deposits and used the funds to generate income for its own business and to fund interest payments to the lenders.

Nexo loaned out assets it received to businesses that needed cryptocurrencies, but also engaged in other activities, such as trading on decentralized crypto exchanges and entering into options and swaps contracts, according to the SEC.

Last year, another crypto lender, BlockFi Lending LLC, agreed to pay $100 million to settle an investigation of its product by the SEC and several states. BlockFi’s fine was the highest civil monetary penalty ever agreed to by a cryptocurrency company with the SEC. BlockFi has since entered bankruptcy, blaming its position on last year’s downturn in cryptocurrency prices and the failure of exchange FTX.

After the SEC announced the enforcement action against BlockFi in February 2022, Nexo voluntarily stopped offering the Earn Interest Product to new U.S. investors, the SEC said. The company plans to exit from the U.S. market entirely shortly after April 1, the SEC said in a settlement order. The agency credited Nexo with cooperating with its investigation.

—Vicky Ge Huang contributed to this article.

Write to Dave Michaels at dave.michaels@wsj.com