California fines crypto asset management platform Nexo $500,000 for "unlicensed lending"

On January 16, the California Department of Financial Protection and Innovation (DFPI) announced a $500,000 fine against the crypto asset management platform Nexo for offering crypto asset-backed loans to at least 5,456 California residents without obtaining a state license. The regulatory agency stated that an investigation found that Nexo’s subsidiary, Nexo Capital Inc. (registered in the Cayman Islands), issued loans to consumers and businesses without a valid license from July 2018 to November 2022, and failed to assess borrowers’ repayment ability, existing debts, or credit history before lending, violating California financial regulations. DFPI Director KC Mohseni said, “Lending institutions must comply with the law and avoid issuing high-risk loans that endanger consumers, and crypto-backed loans are no exception.” In addition to the fine, Nexo is required to transfer all funds of California users to a licensed U.S. affiliated entity within 150 days. This enforcement action comes as Nexo has announced plans to re-enter the U.S. market. The company previously exited the U.S. in 2022 under state and federal regulatory pressure. Earlier, Nexo reached a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) and multiple state regulators in 2023 over unregistered crypto lending and yield products. Analysts pointed out that this case highlights the ongoing regulatory pressure in the U.S. on crypto lending compliance, especially regarding consumer protection and lending review. Nexo has not publicly responded to this matter as of now.