Nexo’s co-founder and managing partner, Kalin Metodiev, said that his company was “surprised” by how eight state regulators took public action against it for securities violations.
This week, the California Department of Financial Protection and Innovation (DFPI) filed a “cease and desist” order against Nexo’s Earn Interest Product, saying that the company was selling a security product as an investment contract that had not been approved by the government.
The DFPI also said that it would join regulators from Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington, and Vermont in taking action against the company. Those states are:
Related: California is the seventh state to order Nexo’s interest account.
Metodiev told Asian Trade at Token2049 that Nexo was surprised by the latest regulatory pushback because it has been “trying to be responsible” for a long time by talking directly with regulators like the Securities and Exchange Commission (SEC).
“We were a little surprised that this news was made public, because this process didn’t just start this week,” he said, adding that:
“We worked with our legal advisors in the U.S., who we’ve been using for the past few years, to help us find our way through these conversations.”
Kalin Metodiev is the co-founder and managing partner of crypto lender Nexo. Metodiev said that Nexo told the SEC earlier this year that it was “voluntarily” stopping services for new U.S. customers. This shows that the company was working in good faith and trying to follow local rules.
Since February 19, new users in the U.S. haven’t been able to sign up for the product, and existing U.S. account holders haven’t been able to add money to their accounts.
“In February, when the SEC ruled against BlockFi, that was the thing that made us decide. As soon as we realised that, we got in touch with the SEC and told them that we’re going to stop taking money from U.S. customers. “We haven’t been working with new customers for our product that gets people interested.”
In the end, this hasn’t stopped Nexo from doing business in the United States. But as long as the company keeps talking to regulators about its crypto offerings, this won’t change.
Metodiev also said that the company is looking at other ways to grow in the U.S. He used the fact that Nexo bought a stake in Hulett Bancorp, a holding company that owns the federally chartered Summit National Bank, as an example.
Nexo has also been on the lookout for crypto companies to buy. Metodiev said that the company has talked to a lot of firms in the bear market that are having trouble with liquidity, including Voyager Digital and Celsius.
Related: DFPI Issues Orders Against Eleven Cryptocurrency Firms in the U.S.
He said that talks with different companies were going well, but he didn’t say anything specific about any deals that might be in the works. Metodiev said that Nexo was priced out of a deal with Voyager because FTX bought it for $1.4 billion, which was too much for Nexo.
“Like I said, if the opportunity becomes too good for us, our risk management kicks in and we say, ‘Hey, we’re not sure we can make money on this.’ We want to help the people and the platform, but it also needs to be a normal business assessment for us,” he said.
