Kansas cracks down on crypto company, joins multi-state settlement

TOPEKA (KSNT) – A division with the Kansas Insurance Department (KID) joined a $22.5 million settlement against a cryptocurrency company Friday.

Kyle Strathman with the KID reports that the Office of the Kansas Securities Commissioner joined a multi-state lawsuit against Nexo Capital, Inc., a cryptocurrency-related financial service company. A consent order against Nexo was entered for offering and selling unregistered securities.

“The securities laws of Kansas exist first and foremost to protect Kansas investors,” KID Insurance Commissioner Vicki Schmidt said. “While the Department does not directly regulate cryptocurrency, we do have regulatory jurisdiction over securities products that are related to cryptocurrencies and will continue to enforce state law.”

In total, 27 other states filed the order as part of a multi-state task force with the North American Securities Administrators Association (NASAA), according to Strathman. Kansas was awarded $424,528.30 for its part of the overall settlement of $22.5 million.

Strathman went on to say Nexo’s Earned Income Product (EIP) investors could passively earn interest on digital assets by loaning those assets to Nexo. The company maintained total discretion over the revenue-generating activities used to earn returns for investors. Nexo offered and promoted EIP and other products to U.S. investors through its website and its social media channels, suggesting that investors could get returns as high as 36% in some instances.

Nexo was alleged to have failed to comply with state securities registration requirements, depriving investors of important information necessary to understand and evaluate the risks of investing in the EIP, according to Strathman. Nexo had previously agreed to pay $45 million in penalties in January with $22.5 million in fines and another $22.5 million penalty, according to the U.S. Securities and Exchange Commission.

If you believe you are the victim of securities fraud, you are encouraged to contact the Office of the Securities Commissioner at 785-296-3071 or send a complaint online by clicking here. To see a copy of the consent order sent to Nexo, see the document below: