The crypto lending firm Nexo
The California Department of Financial Protection and Innovation (DFPI) reported that Nexo issued more than 5,400 loans in the state without the required license.
According to the regulator, the company often failed to review basic financial details, such as debt levels, income, and credit history, before approving loans.
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DFPI Commissioner KC Mohseni stated that lenders must follow state lending laws and protect borrowers from risky lending practices. He added that the same rules apply to loans backed by cryptocurrency.
Crypto-backed loans let users borrow cash or stablecoins by using digital assets as collateral. These loans are usually easier to obtain than traditional loans and often don’t require a credit check.
However, missing payments can result in the automatic sale of the borrower’s crypto to cover the debt.
The DFPI said Nexo’s weak loan review process made borrowers more likely to default. It added that the loans, issued between July 2018 and November 2022, violated state consumer protection laws by failing to meet proper lending standards.
Under the settlement, Nexo must transfer all funds held for California users to Nexo Financial LLC within 150 days. This US-based company is licensed with the DFPI to operate as a finance lender in the state.
Recently, authorities in Cambodia have arrested Chen Zhi, a businessman accused of running a global cryptocurrency scam. How did the case unfold? Read the full story.
