The Colorado Division of Securities has issued a consent order against Nexo Capital Inc. (Nexo), a Cayman Islands-based corporation that provides cryptocurrency-related financial services. The Division’s action is part of a nationwide settlement of alleged securities law violations by Nexo in connection with its Earn Interest Product (EIP) accounts. Nexo’s EIP promised to pay investors interest on cryptocurrency deposited into a Nexo “crypto interest account.”
The North American Securities Administrators Association (NASAA) and the U.S. Securities Exchange Commission announced in January that a settlement had been reached with Nexo. Colorado is among other state securities regulators that agreed to the terms of a settlement with Nexo to resolve its past unregistered activities.
The agreement came as a result of a working group of state securities regulators conducting an investigation into Nexo’s EIP program. During the investigation it was discovered that EIP investors could passively earn interest on digital assets by loaning those assets to Nexo. Nexo maintained total discretion over the revenue-generating activities used to earn returns for investors. The company offered and promoted the EIP and other products to U.S. investors via its website and social media channels, suggesting that investors could obtain returns as high as 36% in some instances.
Nexo was alleged to have failed to comply with state securities registration requirements, depriving investors of important information necessary to understand and evaluate the risks of investing in the EIP.
“All financial services companies, including those offering services for crypto assets, must comply with Colorado’s securities laws,” said Colorado Securities Commissioner Tung Chan. “In partnership with NASAA and other state securities regulators, we will continue to ensure that companies operating here follow our securities laws.”
Nexo has agreed to pay $22.5 million to settle the allegations with Colorado and other U.S. states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands, or $424,528.30 per jurisdiction, to resolve the violations. Nexo also agreed to stop offering and selling the EIP in Colorado and will cease paying interest on all existing EIP accounts on April 1, 2023, unless the EIP is properly qualified for sale in Colorado.
If Colorado consumers believe they’ve been affected by this activity or any other investment fraud, they can file a complaint with the Colorado Division of Securities online at https://securities.colorado.gov/file-a-complaint or with the FBI Internet Crime Complaint Center (IC3) at https://complaint.ic3.gov/.