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

The California Department of Financial Protection and Innovation (DFPI) announced a fine of $500,000 against the cryptocurrency asset management platform Nexo for providing crypto asset-backed loans to at least 5,456 California residents without obtaining state-level licensing.

Regulators stated that an investigation found that Nexo's Nexo Capital Inc. (registered in the Cayman Islands) issued loans to consumers and businesses from July 2018 to November 2022 without a valid license, and failed to assess borrowers' repayment ability, existing debts, or credit history before lending, violating California's financial regulations. DFPI Director KC Mohseni stated, "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 also required to transfer all California user funds to a licensed U.S. affiliate within 150 days.

This penalty comes at a time when Nexo has expressed plans to return to the U.S. market. The company had previously exited the U.S. under state and federal regulatory pressure in 2022. Earlier, Nexo reached a settlement totaling $45 million with the U.S. Securities and Exchange Commission (SEC) and multiple state regulators in 2023 for unregistered crypto lending and yield products. Analysts pointed out that this case again highlights the ongoing high-pressure stance of U.S. regulators on compliance in the crypto lending business, particularly regarding consumer protection and lending reviews. As of now, Nexo has not publicly responded to this matter.