If you’re an investor, you’ll be pleased to know that the Oregon Division of Financial Regulation (DFR) will receive $424,528.30 as part of a settlement with Nexo Capital, Inc. (Nexo), as announced by the North American Securities Administrators Association (NASAA) and the U.S. Securities and Exchange Commission (SEC). The settlement is related to the sale of certain crypto asset lending products, and Nexo has been found guilty of selling unregistered securities throughout the U.S. and failing to disclose important information relating to the investments.
In Oregon, more than 1,400 people invested more than $11 million in Nexo, which is currently in the process of settling with all 50 states and additional North American securities regulators for a total of $25 million. Out of that total, $42,452.83 will go to the DFR financial education account. The final payment of the settlement is due Nov. 20, 2023.
Comprehensive Investigation into Nexo’s Activities
A working group of state regulators has conducted a comprehensive investigation into Nexo’s alleged offer and sale of unregistered securities in the form of its Earned Interest Product (EIP), wherein investors would deposit their crypto assets with Nexo in exchange for promised rates of return. The investigation 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 used 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 percent.
Failure to Comply with State Registration Requirements
Nexo failed to comply with state registration requirements and, as a result, investors were sold unregistered securities in violation of state law and were deprived of critical information and disclosures necessary to understand the potential risks of the EIP. Many state regulators have agreed to the terms of a settlement with Nexo to resolve its past unregistered activities, and more jurisdictions are expected to follow.
More About Nexo
Nexo is a Cayman Islands corporation established in 2018 that provides virtual currency-related financial services to retail and institutional borrowers in the U.S., including trading, borrowing, and lending services. Nexo 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.
Compliance with Investor Protection Laws
“All financial services companies, including new companies offering services for crypto assets, must comply with Oregon’s investor protection laws,” said TK Keen, administrator for DFR. “In partnership with NASAA and other state agencies, the division continues its efforts to protect Oregonians’ retirement savings investments and ensure that companies operating in Oregon do so in accordance with the law. Cryptocurrencies and related investments are typically a volatile investment product with higher risks. Investors need to read through all of an entity’s disclosures – including what may be quite a bit of fine print – to fully understand the risks, which underscores the importance of consumers having the opportunity to read through these materials.”
Importance of Reading through Disclosures
As an investor, it is important to understand the risks associated with investing in cryptocurrencies and related investments. Cryptocurrencies are typically a volatile investment product with higher risks, and it is essential to read through all of an entity’s disclosures, including what may be quite a bit of fine print, to fully understand the risks involved. This underscores the importance of consumers having the opportunity to read through these materials.
Protecting Oregonians
The Oregon Division of Financial Regulation (DFR) is committed to protecting Oregonians’ retirement savings investments and ensuring that companies operating in Oregon comply with the law. This includes financial services companies, including new companies offering services for crypto assets. The recent settlement with Nexo Capital, Inc. highlights the importance of compliance with state registration requirements and the need for companies to provide critical information and disclosures necessary for investors to understand potential risks. Investors should be aware of the risks associated with investing in cryptocurrencies and related investments, and take the time to read through all disclosures to fully understand those risks. The DFR, in partnership with other state agencies and NASAA, will continue to work to protect investors and ensure that companies comply with investor protection laws.
Reference:
State of Oregon Newsroom : NewsDetail : State of Oregon. (2016). Retrieved March 5, 2023, from Oregon.gov website: https://ift.tt/7HQupma
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