California Fines Nexo $500,000 for Unlicensed Crypto-Backed Loans

• California fined Nexo after regulators found years of unlicensed crypto backed lending to thousands of state residents.
• Regulators ordered Nexo to move California customer funds to a licensed US affiliate within one hundred fifty days.
• The fine adds to earlier US penalties and highlights ongoing compliance risks across the crypto lending sector.

California regulators have fined crypto lender Nexo $500,000 after finding years of unlicensed lending activity involving thousands of residents. The action adds pressure on firms that offered crypto-backed loans without state approval.

Regulators say the case highlights persistent compliance gaps in digital asset lending. The penalty follows a multi-year examination by California authorities. It also revives scrutiny around Nexo’s past US operations.

The California Department of Financial Protection and Innovation found Nexo issued crypto-backed loans without a state lending license. The review identified at least 5,456 California residents who received consumer or commercial loans. Regulators said the activity violated state lending laws. They also said the company operated through Nexo Capital Inc., a Cayman Islands entity. The conduct spanned from July 2018 through November 2022.

During that period, Nexo expanded its crypto-backed lending footprint across several US states. California regulators said the company did not hold required approvals. As a result, authorities moved to impose financial penalties. The agency said the findings followed a formal regulatory examination. The action reflects stricter oversight of crypto lending products.

California regulators said Nexo failed to evaluate borrowers’ ability to repay loans. They said the company did not review existing debt obligations. They also cited the absence of credit history assessments. These failures raised concerns about consumer risk exposure. Regulators said such practices could amplify financial harm during market stress.

In addition to the fine, regulators imposed operational requirements. Nexo must transfer all California customer funds to a licensed US affiliate. The company has 150 days to complete the process. Authorities said the move aims to protect consumers. The order applies to all affected California accounts.

The California action adds to earlier US enforcement against Nexo. In 2023, state regulators led a multistate settlement tied to the company’s Earn Interest Product. That agreement totaled $22.5 million. Federal regulators also acted that year. The US Securities and Exchange Commission imposed another $22.5 million penalty.

Those actions pushed Nexo’s 2023 US penalties to $45 million. Following regulatory pressure, Nexo exited the US market. The firm shut down traditional lending services for US customers. However, it continued crypto-backed borrowing services outside the country. Regulators said the latest fine relates to earlier conduct.

Despite enforcement actions, Nexo has pursued international expansion and brand visibility. The company secured a multi-year sponsorship with the Australian Open. Meanwhile, it has signaled interest in returning to the US market. In April last year, Nexo announced plans to reenter the country. The announcement came during a high-profile event in Sofia.