The crypto lending platform Nexo has settled with federal and state regulators in the United States for offering and selling unregistered securities, paying a total penalty of $45 million. The Securities and Exchange Commission (SEC) received $22.5 million, and the rest went to state regulatory authorities.
In addition to the fine, the Attorney General of New York obtained another $1.5 million for the state to settle with the platform for its services through a virtual currency trading platform
Trading Platform
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
Read this Term called Nexo Exchange. Thus, the total penalty on the platform increased to $46.5 million.
The regulators, federal and state, blamed Nexo for offering and selling a cryptocurrency lending product, Earn Interest Product, that was classified as securities. These products gave users a fixed interest in depositing their crypto assets on the platform.
“We charged Nexo with failing to register its retail crypto lending
Crypto Lending
The process of lending cryptocurrency assets with an accrued interest rate and due date is known as crypto lending. The process of crypto lending often occurs through cryptocurrency exchanges or online lending platforms to connect borrowers to lenders. Lenders of crypto lending are comprised of institutional lenders, like hedge funds and asset managers, individual participants, or entities seeking to accrue interest. On the opposite end of the spectrum, borrowers of crypto lending include market makers, proprietary traders, investment managers, hedge funds, traders.These entities or individuals look to short the market, arbitrage-based traders, or entities who need to fulfill an obligation with another party. Different Types of Crypto LendingWhile the process of crypto lending is simply, there are four types of crypto lending practices that traders should familiarize themselves with.Companies, individuals, or entities who possess an excess of cryptocurrencies can earn additional cryptocurrencies through crypto lending. Crypto-to-crypto lending materializes in the form of a smart contract, where crypto lenders can earn interest for a specific period. Common cryptocurrencies that are lent include Bitcoin, Ethereum, and Altcoins. Two examples of crypto-to-crypto lending include Nuo and Coincheck. Moreover, margin lending is a new type of crypto lending, which enables lenders to fund varying cryptocurrencies to borrowers as opposed to a single crypto asset. Typically, lenders of margin lending fix their interest rate and contract duration while occurring over a centralized platform such as Nuo and Bitfinex. While less common, crypto-to-fiat lending occurs when individuals, businesses, or entities require cash. Cryptocurrencies are used as collateral while the lender receives a fiat return which generally is credited to a linked bank account. Finally, crypto-credit lending occurs when entities need capital. Opposed to peer-to-peer (P2P) lending, crypto-credit lending places less emphasis on credit history although this comes with a sacrifice of regulation.
The process of lending cryptocurrency assets with an accrued interest rate and due date is known as crypto lending. The process of crypto lending often occurs through cryptocurrency exchanges or online lending platforms to connect borrowers to lenders. Lenders of crypto lending are comprised of institutional lenders, like hedge funds and asset managers, individual participants, or entities seeking to accrue interest. On the opposite end of the spectrum, borrowers of crypto lending include market makers, proprietary traders, investment managers, hedge funds, traders.These entities or individuals look to short the market, arbitrage-based traders, or entities who need to fulfill an obligation with another party. Different Types of Crypto LendingWhile the process of crypto lending is simply, there are four types of crypto lending practices that traders should familiarize themselves with.Companies, individuals, or entities who possess an excess of cryptocurrencies can earn additional cryptocurrencies through crypto lending. Crypto-to-crypto lending materializes in the form of a smart contract, where crypto lenders can earn interest for a specific period. Common cryptocurrencies that are lent include Bitcoin, Ethereum, and Altcoins. Two examples of crypto-to-crypto lending include Nuo and Coincheck. Moreover, margin lending is a new type of crypto lending, which enables lenders to fund varying cryptocurrencies to borrowers as opposed to a single crypto asset. Typically, lenders of margin lending fix their interest rate and contract duration while occurring over a centralized platform such as Nuo and Bitfinex. While less common, crypto-to-fiat lending occurs when individuals, businesses, or entities require cash. Cryptocurrencies are used as collateral while the lender receives a fiat return which generally is credited to a linked bank account. Finally, crypto-credit lending occurs when entities need capital. Opposed to peer-to-peer (P2P) lending, crypto-credit lending places less emphasis on credit history although this comes with a sacrifice of regulation.
Read this Term product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” said the Chair of the SEC, Gary Gensler. “Compliance with our time-tested public policies isn’t a choice. Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable.”
The order is similar to a $100 million settlement of the SEC and other state securities regulators with BlockFi, another crypto lending platform now under bankruptcy proceedings. Nexo voluntarily ceased offering lending products to new US customers last February after the BlockFi settlement. The crypto lending platform also ceased paying interest on new funds.
Moreover, the company ceased offering its products in certain US states last month as a part of its permanent exit from the US.
“Among other actions, Nexo is ceasing its unregistered lending product as to all US investors,” Gensler added.
An official guide of Nexo on its EIPs.
New York’s Extra Effort against Nexo
Along with the actions of the regulatory agencies, the New York state’s Office of the Attorney General filed a separate civil lawsuit against Nexo last September. The crypto-lending platform has around 3,000 investors from New York.
In addition to the monetary penalty, Nexo is now banned from the securities industry in New York for five years and has to notify all of its clients to withdraw assets from the platform by 1 April 2023. On top of that, the company agreed to conduct identity verification of new customers to prevent further violations.
“Cryptocurrency companies are unreliable and shady, but they are not immune from accountability,” said the New York Attorney General, Letitia James. “Nexo ignored repeated warnings by my office to register, and today, they are paying the price for their wrongdoing. The days of crypto companies acting like the rules do not apply to them are ending.”
Nexo’s Response
Despite paying the hefty fine and taking the big business decision, Nexo did not admit or deny the allegations against it, which is a standard practice in such settlements.
The company is now calling the monetary settlement a “landmark resolution with US regulators,” highlighting its proactive moves and the fact that the regulators did not bring “any fraud, or misleading business practices” charges.
“We are content with this unified resolution which unequivocally puts an end to all speculations around Nexo’s relations to the United States. We can now focus on what we do best – build seamless financial solutions for our worldwide audience,” said Antoni Trenchev, the Co-Founder of Nexo.
Characteristics of the settlement with U.S. Federal regulators:
– The settlements are on a no-admit-no-deny basis
– The sole allegation was that Nexo’s Earn Interest Product was an unregistered securities offering.
– This closes all multi-year-long inquiries into Nexo.
2/9
— Nexo (@Nexo) January 19, 2023
Meanwhile, Nexo is facing backlash outside the United States. Its offices in Bulgaria were raided earlier this month by local investigators and foreign agents. Furthermore, the Bulgarian prosecutors have launched an international operation to investigate the company for allegedly committing financial crimes, failing its anti-money laundering (AML) processes, and allowing transactions that violate the international sanctions against Russia.
The crypto lending platform Nexo has settled with federal and state regulators in the United States for offering and selling unregistered securities, paying a total penalty of $45 million. The Securities and Exchange Commission (SEC) received $22.5 million, and the rest went to state regulatory authorities.
In addition to the fine, the Attorney General of New York obtained another $1.5 million for the state to settle with the platform for its services through a virtual currency trading platform
Trading Platform
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
Read this Term called Nexo Exchange. Thus, the total penalty on the platform increased to $46.5 million.
The regulators, federal and state, blamed Nexo for offering and selling a cryptocurrency lending product, Earn Interest Product, that was classified as securities. These products gave users a fixed interest in depositing their crypto assets on the platform.
“We charged Nexo with failing to register its retail crypto lending
Crypto Lending
The process of lending cryptocurrency assets with an accrued interest rate and due date is known as crypto lending. The process of crypto lending often occurs through cryptocurrency exchanges or online lending platforms to connect borrowers to lenders. Lenders of crypto lending are comprised of institutional lenders, like hedge funds and asset managers, individual participants, or entities seeking to accrue interest. On the opposite end of the spectrum, borrowers of crypto lending include market makers, proprietary traders, investment managers, hedge funds, traders.These entities or individuals look to short the market, arbitrage-based traders, or entities who need to fulfill an obligation with another party. Different Types of Crypto LendingWhile the process of crypto lending is simply, there are four types of crypto lending practices that traders should familiarize themselves with.Companies, individuals, or entities who possess an excess of cryptocurrencies can earn additional cryptocurrencies through crypto lending. Crypto-to-crypto lending materializes in the form of a smart contract, where crypto lenders can earn interest for a specific period. Common cryptocurrencies that are lent include Bitcoin, Ethereum, and Altcoins. Two examples of crypto-to-crypto lending include Nuo and Coincheck. Moreover, margin lending is a new type of crypto lending, which enables lenders to fund varying cryptocurrencies to borrowers as opposed to a single crypto asset. Typically, lenders of margin lending fix their interest rate and contract duration while occurring over a centralized platform such as Nuo and Bitfinex. While less common, crypto-to-fiat lending occurs when individuals, businesses, or entities require cash. Cryptocurrencies are used as collateral while the lender receives a fiat return which generally is credited to a linked bank account. Finally, crypto-credit lending occurs when entities need capital. Opposed to peer-to-peer (P2P) lending, crypto-credit lending places less emphasis on credit history although this comes with a sacrifice of regulation.
The process of lending cryptocurrency assets with an accrued interest rate and due date is known as crypto lending. The process of crypto lending often occurs through cryptocurrency exchanges or online lending platforms to connect borrowers to lenders. Lenders of crypto lending are comprised of institutional lenders, like hedge funds and asset managers, individual participants, or entities seeking to accrue interest. On the opposite end of the spectrum, borrowers of crypto lending include market makers, proprietary traders, investment managers, hedge funds, traders.These entities or individuals look to short the market, arbitrage-based traders, or entities who need to fulfill an obligation with another party. Different Types of Crypto LendingWhile the process of crypto lending is simply, there are four types of crypto lending practices that traders should familiarize themselves with.Companies, individuals, or entities who possess an excess of cryptocurrencies can earn additional cryptocurrencies through crypto lending. Crypto-to-crypto lending materializes in the form of a smart contract, where crypto lenders can earn interest for a specific period. Common cryptocurrencies that are lent include Bitcoin, Ethereum, and Altcoins. Two examples of crypto-to-crypto lending include Nuo and Coincheck. Moreover, margin lending is a new type of crypto lending, which enables lenders to fund varying cryptocurrencies to borrowers as opposed to a single crypto asset. Typically, lenders of margin lending fix their interest rate and contract duration while occurring over a centralized platform such as Nuo and Bitfinex. While less common, crypto-to-fiat lending occurs when individuals, businesses, or entities require cash. Cryptocurrencies are used as collateral while the lender receives a fiat return which generally is credited to a linked bank account. Finally, crypto-credit lending occurs when entities need capital. Opposed to peer-to-peer (P2P) lending, crypto-credit lending places less emphasis on credit history although this comes with a sacrifice of regulation.
Read this Term product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” said the Chair of the SEC, Gary Gensler. “Compliance with our time-tested public policies isn’t a choice. Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable.”
The order is similar to a $100 million settlement of the SEC and other state securities regulators with BlockFi, another crypto lending platform now under bankruptcy proceedings. Nexo voluntarily ceased offering lending products to new US customers last February after the BlockFi settlement. The crypto lending platform also ceased paying interest on new funds.
Moreover, the company ceased offering its products in certain US states last month as a part of its permanent exit from the US.
“Among other actions, Nexo is ceasing its unregistered lending product as to all US investors,” Gensler added.
An official guide of Nexo on its EIPs.
New York’s Extra Effort against Nexo
Along with the actions of the regulatory agencies, the New York state’s Office of the Attorney General filed a separate civil lawsuit against Nexo last September. The crypto-lending platform has around 3,000 investors from New York.
In addition to the monetary penalty, Nexo is now banned from the securities industry in New York for five years and has to notify all of its clients to withdraw assets from the platform by 1 April 2023. On top of that, the company agreed to conduct identity verification of new customers to prevent further violations.
“Cryptocurrency companies are unreliable and shady, but they are not immune from accountability,” said the New York Attorney General, Letitia James. “Nexo ignored repeated warnings by my office to register, and today, they are paying the price for their wrongdoing. The days of crypto companies acting like the rules do not apply to them are ending.”
Nexo’s Response
Despite paying the hefty fine and taking the big business decision, Nexo did not admit or deny the allegations against it, which is a standard practice in such settlements.
The company is now calling the monetary settlement a “landmark resolution with US regulators,” highlighting its proactive moves and the fact that the regulators did not bring “any fraud, or misleading business practices” charges.
“We are content with this unified resolution which unequivocally puts an end to all speculations around Nexo’s relations to the United States. We can now focus on what we do best – build seamless financial solutions for our worldwide audience,” said Antoni Trenchev, the Co-Founder of Nexo.
Characteristics of the settlement with U.S. Federal regulators:
– The settlements are on a no-admit-no-deny basis
– The sole allegation was that Nexo’s Earn Interest Product was an unregistered securities offering.
– This closes all multi-year-long inquiries into Nexo.
2/9
— Nexo (@Nexo) January 19, 2023
Meanwhile, Nexo is facing backlash outside the United States. Its offices in Bulgaria were raided earlier this month by local investigators and foreign agents. Furthermore, the Bulgarian prosecutors have launched an international operation to investigate the company for allegedly committing financial crimes, failing its anti-money laundering (AML) processes, and allowing transactions that violate the international sanctions against Russia.
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