Nexo to pay $500,000 to California regulator over loans to residents

Crypto lending firm Nexo Capital will pay $500,000 to California’s Department of Financial Protection and Innovation after the regulator alleged the company issued thousands of loans to state residents without properly assessing their ability to repay. The DFPI said Nexo made at least 5,456 consumer and commercial loans to Californians without a valid license.

The regulator said, "Before making a loan, Nexo Capital generally did not evaluate the borrower’s ability to make timely repayments, existing debt, credit history, or other documents relating to the borrower’s overall financial condition." DFPI Commissioner KC Mohseni said lenders "must follow the law and avoid making risky loans that endanger consumers — and crypto-backed loans are no exception." The DFPI said Nexo’s "lack of underwriting policies" increased the risk of borrower default.

The regulator described crypto-backed loans as arrangements that let users borrow fiat or stablecoins by posting digital assets as collateral and said missed repayments can trigger forced sales of collateral. It said the loans were issued between July 2018 and November 2022 and involved "unlawful acts and practices" related to a consumer product or service that failed to comply with consumer financial laws.

As part of the action, Nexo must, within 150 days, transfer all California residents’ funds to Nexo Financial LLC, a US-based affiliate that holds a California Finance Lenders License with the DFPI.

Key Topics

Crypto, Nexo Capital, California, Dfpi, Kc Mohseni, Crypto-backed Loans