Texas Securities Board Joins $22.5 Million State Settlement with Nexo Capital over Unregistered Digital Assets Investment Accounts

Jan 19

The Texas State Securities Board joined other state securities regulators and the U.S. Securities Exchange Commission (SEC) in jointly announcing a settlement in principle with Nexo Capital, Inc. (Nexo). The settlement requires Nexo to pay a total of approximately $22.5 million in fines to state regulators, including $420,000 to Texas.  Thirteen other state regulators have already agreed to the terms of a settlement, and more jurisdictions are expected to follow.

A working group of state regulators, led by the Washington Department of Financial Institutions, investigated Nexo’s offer and sale of unregistered securities in the form of the company’s Earned Interest Program (EIP).  Clients invested in EIP by lending digital assets to Nexo, and Nexo was afforded complete discretion in using their digital assets to generate revenue.  In exchange, Nexo claimed investors would be paid lucrative returns – and in at least one instance, the returns may have been as much as 36%.
“Many industries are now incorporating blockchain technology, and digital assets providing new opportunities for many firms,” said Securities Commissioner Travis J. Iles, “However, securities dealers must continue to comply with laws that protect Texans and preserve confidence in the markets.  These laws continue to apply to high-tech securities tied to digital assets.”  

“We appreciate the good work of the State of Washington, our fellow state securities regulators, the SEC and the Texas Department of Banking in bringing this matter to an investor friendly resolution.”

Pursuant to the terms of the settlement, Nexo will pay a fine of $424,528.30 in each state 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. The settlement also protects Texans by requiring Nexo to take steps to safeguard clients of Nexo.

“We work to protect investors,” said Enforcement Director Joe Rotunda.  “And our work does not begin and end with traditional products and established markets.  We are continuing to address other promoters of unregistered products, including firms that may be leveraging widespread interest in digital assets to sell unregulated, risky products.”

The Texas State Securities Board is a leader in protecting investors from illegal and fraudulent digital asset securities schemes.  In 2017, the agency filed the first state securities enforcement action to stop the fraudulent sale of securitized digital assets.  More recently, the Texas State Securities Board coordinated the state settlement with BlockFi Lending LLC and filed enforcement actions to protect Texans from promoters accused of illegally and/or fraudulently dealing in similar instruments, including Voyager Digital Ltd., Celsius Network, Celsius ex-CEO Alexander Mashinsky and ex-FTX.us principal Sam Bankman-Fried.  It continues to advocate for investors in bankruptcy proceedings initiated by various firms allegedly promoting digital asset depository accounts.

The TSSB recognizes the hard work and expertise of state securities regulators in Washington, California, New York, Kentucky, Maryland, Wisconsin, South Carolina, Oklahoma, Vermont, and Indiana.  Their contributions were essential to the case. 

CONTACT:  TSSB Enforcement Director Joe Rotunda by email at jrotunda@ssb.texas.gov or by telephone at 512-305-8392