March 3, 2023
SALEM – The North American Securities Administrators Association (NASAA) and the U.S. Securities and Exchange Commission (SEC) recently announced that a settlement has been reached with Nexo Capital, Inc. (Nexo) as related to the sale of certain crypto asset lending products.
Nexo was found to offer and sell unregistered securities throughout the U.S. and failed to disclose material information relating to the investments. In Oregon, more than 1,400 people invested more than $11 million. Nexo is in process of settling with all 50 states and additional North American securities regulators for total of $25 million. The Oregon Division of Financial Regulation (DFR) will receive $424,528.30 via a payment plan with the final payment due Nov. 20, 2023. Out of that total, $42,452.83 will go to the DFR financial education account.
In the past year, a working group of state regulators conducted a comprehensive investigation into Nexo's alleged offer and sale of unregistered securities in the form of its Earned Interest Product (EIP), wherein investors would deposit their crypto assets with Nexo in exchange for promised rates of return. Many state regulators have agreed to the terms of a settlement with Nexo to resolve its past unregistered activities. More jurisdictions are expected to follow.
Nexo is a Cayman Islands corporation established in 2018 that provides virtual currency-related financial services to retail and institutional borrowers in the U.S., including trading, borrowing, and lending services. The investigation 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 investors in the U.S. via its website and social media channels, suggesting in some instances that investors could obtain returns as high as 36 percent.
Nexo failed to comply with state registration requirements and, as a result, investors were sold unregistered securities in violation of state law and also were deprived of critical information and disclosures necessary to understand the potential risks of the EIP.
“All financial services companies, including new companies offering services for crypto assets, must comply with Oregon's investor protection laws," said TK Keen, administrator for DFR. “In partnership with NASAA and other state agencies, the division continues its efforts to protect Oregonians' retirement savings investments and ensure that companies operating in Oregon do so in accordance with the law. Cryptocurrencies and related investments are typically a volatile investment product with higher risks. Investors need to read through all of an entity's disclosures – including what may be quite a bit of fine print – to fully understand the risks, which underscores the importance of consumers having the opportunity to read through these materials."
The division's consent order against Nexo can be found on our
About Oregon DFR: The Division of Financial Regulation is part of the Department of Consumer and Business Services, Oregon's largest business regulatory and consumer protection agency. Visit