The Ohio Division of Securities added its name to the $22.5 million multi-state settlement against the Nexo cryptocurrency lending platform. US regulators previously alleged that the company failed to comply with local requirements when offering earned interest products (EIPs).
The “Buckeye State” watchdog issued a consent order against Nexo, joining other US states that claimed the cryptocurrency firm violated some rules by offering earned interest products (EIP). The company promoted its option through social media channels and on its website to American consumers, saying they could earn returns of up to 36%.
The North American Securities Administrators Association (NASAA) and the SEC insisted that Nexo failed to disclose vital information about the products and did not describe the risks to investors. There were more than 2,300 Ohioans who joined the program at the end of July 2022 and collectively distributed more than $15 million. Nexo had 93,318 EIP investors in the US who committed approximately $800 million.
Ohio Joins the Club
Andrea Seidt, Ohio’s Securities Commissioner, stated that “All financial services companies, including those offering services for crypto assets, must comply with Ohio’s securities laws.” The Commissioner further added that “In partnership with NASAA and other state securities regulators, we will continue to protect Ohioans’ investments and ensure that companies operating here follow our securities laws.”
Nexo agreed to pay $22.5 million to resolve issues with regulators in Ohio and the other states, as well as authorities in Puerto Rico, the US Virgin Islands and the District of Columbia. It also agreed to stop offering and selling the EIP in Ohio and will cease paying interest on all existing EIP accounts on April 1, 2023.
The local regulator told consumers affected by Nexo’s activities or those who feel they have become victims of investment fraud to file an online complaint with the Division. He warned investors to deal with such platforms only after conducting proper due diligence and checking whether they are registered with designated watchdogs.
Nexo’s $45 Million Fine
The crypto lender voluntarily agreed to pay $45 million in penalties to numerous entities in January. It transferred half of the sum to the SEC, while the remaining $22.5 million was distributed to at least 17 independent state securities regulators. SEC Chairman Gary Gensler explained that Nexo was charged for failing to register its EIP program, not for operating it:
““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. 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. In this case, among other actions, Nexo is ceasing its unregistered lending product as to all US investors.”
By Audy Castaneda
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