Kalin Metodiev, co-founder and managing partner of crypto lender Nexo, stated that his company was “shocked” by the way eight state regulators publicly took action against it for securities violations.
Earlier this week, The California Department of Financial Protection and Innovation (DFPI) filed a cease and desist order against Nexo’s Earn Interest product, alleging that the company offered a product of value that the government had not authorized for sale in the form of an investment contract. investment.
The DFPI also stated that it was 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 backlash as it has been “trying to be responsible” by engaging in direct talks with regulators, such as the Securities and Exchange Commission (SEC), for quite some time.
“We were a little surprised that this news was released in public, you know, because this is not a process that just started this week,” he said, adding that:
“We have worked with our legal advisors in the United States that we have used for the past two years to guide us as it relates to these discussions.”
Methodiev said that Nexo also told the SEC earlier this year that it was “voluntarily” discontinuing services for new US clients, suggesting the firm was working in good faith and with the goal of complying with local regulations.
The product has not been available to new users in the US since February 19, and existing US account holders were unable to make new deposits to their accounts.
“The event that made us make the decision was actually the SEC ruling against BlockFi in February. The moment we saw that, we contacted the SEC and communicated that we would no longer voluntarily accept money from US customers. And we haven’t been working with new clients for our interest-generating product.”
As a last resort, this has not caused Nexo to stop providing services in the United States. However, the firm will remain in talks with regulators about its cryptocurrency offerings.
Metodiev also noted that the company is seeking expansion in the United States through other avenues, noting that Nexo this week acquired a stake in Hulett Bancorp, a holding company that owns Summit National Bank, which has a federal license.
Nexo has also been looking at acquisitions of cryptocurrency companies, with Metodiev noting that the company has held talks with many cash-strapped companies during the crypto bear market.even with companies like Voyager Digital and Celsius.
Although he stated that talks had gone well with several companies, he did not provide any concrete details about any deals that might be in the works. Metodiev suggested that a deal with Voyager had been ruled out, as the valuation of the $1.4bn assets for which FTX acquired it was too high for Nexo.
“If the opportunity gets too rich for us, as I’ve mentioned, our risk management kicks in and we say, you know, we’re not sure we can break even on this. We want to help the people and the platform, but at the same time, it has to be a normal business assessment for us,” he said.
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