California Department of Financial Protection and Innovation fined Nexo $500,000 for issuing unlicensed crypto-backed loans. The agency said the loans affected at least 5,456 residents from 2018 to 2022, as stated.
Regulators found Nexo failed to evaluate borrowers’ ability to repay, existing debt, or credit history. The firm must move all California resident funds to a licensed U.S. affiliate within 150 days.
“Lenders must follow the law and avoid making risky loans that endanger consumers—and crypto-backed loans are no exception,” the commissioner said. Nexo called the action a resolution of historical licensing and compliance matters and said these did not reflect current operations.
State regulators previously co-led a task force that secured a $22.5 million settlement over an unregistered interest product. The U.S. SEC also charged the firm and imposed another $22.5 million, bringing 2023 U.S. fines to about $45 million.
Komodo Platform CTO Kadan Stadelmann warned of systemic compliance shortfalls. “The fact that Nexo failed basic ability-to-repay checks for thousands undoubtedly raises red flags about systemic compliance shortfalls, and consumers should heed these warnings,” he said.
Nexo withdrew traditional U.S. lending products in late 2022 and has not restarted services. The company’s plans to re-enter the U.S. now face renewed regulatory scrutiny.
