Nexo Capital, a Cayman Islands-based cryptocurrency platform, has agreed to pay $425,000 to the Minnesota Department of Commerce in a settlement about the sale of unregistered securities.
It is part of a $22.5 million settlement reached in January with multiple states and the U.S. Securities and Exchange Commission (SEC) following federal and state regulators' more than year-long investigation.
As part of the settlement, Nexo said it will stop offering or selling the product in question in Minnesota, and the U.S., and will not accept further investments in it until it's compliant with state and federal laws.
According to the state commerce department, more than 1,400 Minnesotans invested more than $9 million in Nexo's earned-interest product, which did not comply with local law and register with the state. It added consumers did not receive pertinent information and disclosures to understand the potential risks in the investments.
"Minnesota investors shouldn't be deceived about products they are investing their money in," Jacqueline Olson, the commerce department's assistant commissioner of enforcement, said in a statement. "Nexo needed to comply with Minnesota's securities laws."
The SEC said Nexo's earned-interest product was a way for investors to submit their crypto assets to Nexo in exchange for interest. As a result, it found the product is a security and needs to be registered.
In a statement, Nexo said it has cooperated fully with the government's inquiries throughout the last two years, and it has voluntarily decided to stop offering the product in the U.S. It also noted federal regulators have not suggested that Nexo engaged in any fraud or misleading business practices.
Nexo added it believes it is a "pioneer" akin to Uber and Airbnb in "providing disruptive solutions in a fast-paced environment." As such, it doesn't quite fit yet into existing provisions.
