California DFPI Fines Nexo $500K For Unlicensed Crypto-Backed Lending / Fresh Today / CUToday.info

SACRAMENTO, Calif.—The California Department of Financial Protection and Innovation has ordered Nexo Capital Inc. to pay $500,000 in penalties after determining the company violated state financial laws by making crypto-backed loans to California residents without a valid license.

Following an examination of the Cayman Islands–based firm, regulators found Nexo extended consumer and commercial loans to at least 5,456 Californians between July 2018 and November 2022 without adequately assessing borrowers’ ability to repay. The DFPI said the company generally failed to evaluate income, existing debt, credit history, or overall financial condition, conduct required under the California Financing Law.

“Lenders must follow the law and avoid making risky loans that endanger consumers — and crypto-backed loans are no exception,” said DFPI Commissioner KC Mohseni, adding that the department will continue to hold firms accountable when they put consumers’ financial security at risk.

In addition to the penalty, Nexo must transfer all funds belonging to California residents within 150 days to Nexo Financial LLC, a U.S.-based affiliate licensed under the California Financing Law. The action follows earlier enforcement against Nexo, including a $22.5 million multistate settlement in 2022 tied to its crypto interest-earning program and violations of state securities laws.