Nexo Capital has been ordered to pay a $500,000 penalty after California’s Department of Financial Protection and Innovation said the crypto lending platform operated without the required state license. According to the agency, Nexo issued at least 5,456 consumer and commercial loans to California residents between July 2018 and November 2022 without holding a valid California finance lender license.
Repayment checks were cited as a central compliance failure
The regulator said the case was not limited to unlicensed lending. DFPI stated that Nexo generally failed to evaluate borrowers’ ability to repay and did not review existing debt, credit history, or other documents tied to a borrower’s broader financial condition. That finding goes to the core of underwriting standards for any lending business, including crypto-backed loans.
In a volatile crypto market, collateral values can fall quickly. If borrower screening is weak at origination, the risks tied to liquidation and loan performance become more severe. DFPI Commissioner KC Mohseni said lenders must follow the law and avoid issuing high-risk loans that endanger consumers, and that crypto-collateralized lending is no exception.
California customer funds must move within 150 days
Under the settlement, Nexo must transfer all funds belonging to California residents within 150 days to its U.S. subsidiary, Nexo Financial LLC. The source material says that subsidiary holds the appropriate state-level licenses. The order reaches beyond past lending activity and directly addresses where customer assets are housed and under which entity they are managed.
The requirement shows how state regulators are pressing offshore or cross-border crypto platforms to place U.S. user assets inside licensed structures. For CeFi firms, licensing status, asset management arrangements, and borrower review procedures are all drawing close scrutiny.
Nexo had already settled with U.S. regulators before
This is not Nexo’s first regulatory case in the United States. In February 2023, the company stopped offering its yield product “Earn Interest” to U.S. customers, one month after reaching a $45 million settlement with federal regulators.
The California action puts the compliance exposure of centralized crypto lenders back in focus. Nexo has long promoted compliance in its public messaging, but this case shows that state regulators are examining unlicensed lending, borrower due diligence, and customer fund transfers at a very detailed operational level.