Tennessee Joins Multiple States in Settlement Regarding Unregistered Offers and Sales of Digital Asset Investments
NASHVILLE – The Tennessee Department of Commerce & Insurance’s (“TDCI”) Division of Securities announces its participation in a multistate financial settlement with Nexo Capital, Inc. (“Nexo”) regarding unregistered offers and sales of securities to Tennessee investors.
The North American Securities Administrators Association (“NASAA”) and the U.S. Securities Exchange Commission (“SEC”) recently announced that a settlement in principle has been reached with Nexo. Tennessee is among the 17 state securities regulators who agreed to the terms of a settlement with Nexo in order to resolve its past unregistered activities. Additional jurisdictions are expected to follow.
A Cayman Islands corporation established in 2018, Nexo provides virtual currency-related financial services to retail and institutional borrowers in the United States, including trading, borrowing, and lending services. Nexo is alleged to have failed to comply with state registration requirements. As a result, investors were sold unregistered securities in violation of state law and, additionally, they were deprived of critical information and disclosures necessary to understand the potential risks of its Earned Interest Product (“EIP”).
Nexo offered and sold EIP accounts to over 93,000 investors in the United States, totaling over $800,000,000.
“Tennessee’s securities laws were created to protect hard-working Tennessee investors, and the registration process is essential to investor protection,” said TDCI Commissioner Carter Lawrence. “State securities regulators are the first line of defense for investors and lead the effort to ensure companies that offer digital asset investments always comply with laws and treat investors fairly. I am proud of our Securities team and their work on behalf of protecting Tennessee consumers.”
The settlement is the culmination of work begun in 2022 by a group of state regulators who conducted a comprehensive investigation into Nexo’s alleged offer and sale of unregistered securities in the form of its EIP. During the regulators’ 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 utilized 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%
"Working collaboratively allows regulators to maximize our resources to efficiently reach a settlement,” said TDCI Assistant Commissioner for Securities Elizabeth Bowling. “This settlement is proof that state regulators and the SEC continue to work to ensure that investors have all the relevant information needed to understand the risks that come before making an investment.”
Consumers can protect themselves when considering investing in digital offerings by following some simple tips available in a new blog post from Assistant Commissioner Bowling that is available here.
Nexo will pay a fine of $424,528.30 to each state participating in the settlement and cease offering and selling the EIP or accepting further investments in the EIP until such activities are compliant with applicable state and federal securities laws.