Nexo fined $500,000 for “unlicensed” crypto loans in California

The California Department of Financial Protection and Innovation (DFPI) has fined Nexo $500,000 for issuing thousands of crypto-backed loans without a license. The agency found that Nexo issued at least 5,456 loans to state residents without reviewing their credit history, debt levels, or ability to repay.

DFPI said the firm violated core consumer-protection rules. Commissioner KC Mohseni noted that crypto loans must be regulated as strictly as traditional ones: “Lenders must follow the law and avoid risky lending practices that put consumers at risk.”

As part of the settlement, Nexo must move all California users’ funds to a licensed U.S. affiliate within 150 days.

The company called the issue “historical licensing and compliance matters” that do not reflect its current operations. A spokesperson said Nexo maintains ongoing dialogue with regulators and is building “a sustainable, compliant infrastructure.” The platform also confirmed it has not resumed offering products in the United States.

The violations cited by DFPI span July 2018 to November 2022 – a period when Nexo was rapidly expanding its lending business before exiting the U.S. market under increasing regulatory pressure.

It is not the company’s first dispute with California authorities. Two years earlier, DFPI and a multistate task force reached a $22.5 million settlement over the unregistered Earn Interest product. That same year, the SEC accused Nexo of offering an unregistered lending product and issued another $22.5 million penalty, bringing total U.S. fines in 2023 to $45 million.

Experts say the case underscores deeper compliance issues. Komodo Platform CTO Kadan Stadelmann said issuing loans to thousands of users without assessing repayment ability “raises serious concerns,” and added that California’s lending rules aim to prevent a “crypto version of the 2008 crisis.”

Nexo’s efforts to re-enter the U.S. market are now further complicated. Stadelmann noted that regulators may demand more disclosures, oversight, or additional penalties – though other crypto firms have endured similar pressure: “FTX and Binance survived this – why not Nexo?”