In a significant regulatory enforcement action, cryptocurrency lending platform Nexo has agreed to pay a $500,000 penalty to California’s Department of Financial Protection and Innovation (DFPI). The settlement, announced in early 2025, resolves allegations that the company engaged in unlicensed lending activities within the state for over four years.
The DFPI’s investigation found that Nexo Capital Inc., a Cayman Islands–based entity, issued 5,456 consumer and commercial loans to California residents between July 2018 and November 2022 without holding the required state lending license. Furthermore, the agency determined that Nexo failed to conduct proper financial assessments of borrowers before extending credit, neglecting to evaluate applicants’ ability to repay, existing debt obligations, and credit histories.
"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 in a statement. The DFPI emphasized that Nexo’s operations created substantial risk for consumers who might have taken on unsustainable debt.
As part of the settlement, Nexo must also transfer all funds of California residents to a licensed U.S. affiliate within 150 days. This penalty adds to Nexo’s long-running regulatory troubles in the U.S., including a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) and state regulators in 2023 over its unregistered Earn Interest Product.
The action underscores the growing sophistication of regulators in addressing crypto-related consumer risks and signals that state authorities are becoming increasingly active in enforcement. Industry experts note that the case serves as a cautionary tale for crypto lending platforms, highlighting the critical importance of licensing and compliance with consumer protection laws as the industry matures.
