Nexo ‘surprised’ by actions of state regulators, says co-founder
Kalin Metodiev, co-founder and managing partner of crypto lender Nexo, said his firm was “surprised” by how eight state regulators have publicly taken action against it for securities violations.
Earlier this week, the California Department of Financial Protection and Innovation (DFPI) filed a forbearance order against Nexo’s Earn Interest product, saying the company was offering a security product that had not been authorized by the government to sell as an investment. Contract.
The DFPI also said it is joining regulators in seven other states in taking action against the company, including Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont.
Speaking to Cointelegraph at Token2049, Metodiev explained that Nexo was caught off guard by the latest regulatory rollback as it was “trying to be responsible” by engaging in direct conversations with regulators such as the Securities and Exchange Commission (SEC ) for a while.
“We were a bit surprised that this news came out, you know, because it’s not a process that just started this week,” he said, adding that:
“We have worked with our legal counsel in the United States who we have used for the past two years to guide us specifically through these waters during these conversations.”
Metodiev said Nexo also communicated to the SEC earlier this year that it was “voluntarily” discontinuing services for new US customers, suggesting the company was working in good faith and aimed to comply with local regulations.
The product has been unavailable to new users in the US since February 19, and existing US account holders have been unable to make new deposits to their accounts.
“The event that made us make the decision was actually the SEC’s decision against BlockFi in February. At the time we saw that we made contact with the SEC, and we communicated that we are voluntarily stopping, in taking money from US customers, and we haven’t worked with new customers for our interest-generating product.
Ultimately, that didn’t deter Nexo from providing services in the US, as the company will continue to talk to regulators about its crypto offerings.
Metodiev also pointed out that the company is considering expansion into the United States through other avenues, indicating that Nexo will this week acquire a stake in Hulett Bancorp, a holding company that owns the federally chartered Summit National Bank.
Nexo has also been on the lookout for acquisitions of crypto companies, with Metodiev noting that the company has had discussions with many companies struggling with liquidity in the bear market, even companies like Voyager Digital and Celsius.
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While he said talks were going well with various companies, he did not provide any concrete details on any deals that may be in the works. Metodiev suggested he was kicked out of a Voyager deal because his $1.4 billion asset valuation, which FTX bought him for, became too high for Nexo.
“If the opportunity becomes too rich for us, like I mentioned, our risk management kicks in and we say, you know, we’re not sure we can break even. We want to help people and the platform, but at the same time it has to be a normal business assessment for us,” he said.