Cryptocurrency platform Nexo Capital, Inc., has agreed to a settlement with the Minnesota Department of Commerce of over $424,000 related to the sale of certain crypto asset lending products. Nexo failed to comply with state securities registration requirements and, as a result, investors were sold unregistered securities in violation of state law. Consumers were also deprived of critical information and disclosures necessary to understand the potential risks of these investments.  

The North American Securities Administrators Association (NASAA), which the Minnesota Department of Commerce is a member, and the U.S. Securities and Exchange Commission (SEC) recently announced a settlement in principle with Nexo. 

In Minnesota, more than 1,400 people invested more than $9 million in Nexo’s Earned Interest Product (EIP). As a result of the settlement, Nexo is stopping its EIP for all U.S. clients as of April 1 and asking clients to withdraw their EIP funds. The Minnesota Department of Commerce’s consent order for Nexo and other enforcement actions can be found on mn.gov/Commerce: in the Take Action bar, find Search Regulatory Actions. 

“Minnesota investors shouldn’t be deceived about products they are investing their money in. Nexo needed to comply with Minnesota’s securities laws,” said Jacqueline Olson, Minnesota Commerce Assistant Commissioner of Enforcement. “Through our investigative team’s work with NASAA, we are able to leverage national enforcement resources to assist and protect Minnesota consumers and ensure a fair marketplace.” 

Nexo is a Cayman Islands corporation established in 2018 that provides virtual currency-related (cryptocurrency) financial services to retail and institutional borrowers in the United States, including trading, borrowing and lending services. 

Over 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). The investigation discovered that EIP investors could passively earn interest on digital assets by loaning those assets to Nexo. The company maintained total discretion over the revenue-generating activities used to earn returns for investors. Nexo also 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 is in process of settling with multiple states and additional North American securities regulators for total of $25 million. As part of the settlement, Nexo will pay a fine of $424,528.30 to Minnesota and cease offering and selling the EIP in Minnesota or accepting further investments in the EIP until such activities are compliant with applicable Minnesota and federal securities laws. 

Cryptocurrencies and related investments are typically a volatile investment product with higher risks. After the giant cryptocurrency exchange FTX filed bankruptcy in November 2022, the Department of Commerce issued a consumer alert urging caution before investing in crypto-interest accounts. 

Commerce Consumer Service Center 

Minnesotan investors with questions or concerns about their own investment accounts can contact the Minnesota Department of Commerce Consumer Service Center:

Consumer.protection@state.mn.us or call 651-539-1637, or file a complaint using our online form: mn.gov/commerce/consumers/file-a-complaint. 

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MEDIA CONTACTS:

Mo Schriner
Minnesota Department of Commerce
mo.schriner@state.mn.us