How eight state regulators orchestrated crypto lender Nexo’s takedown and why it matters


  • Nexo, a leading crypto lender, was caught off guard by eight state regulators publicly taking actions on security violations. 
  • Under regulatory pressure, Nexo pulled nearly 50% of the wrapped Bitcoin, an Ethereum-based token whose value is tied to BTC. 
  • Analysts believe wBTC price is at risk of decline as the lender crumbles under pressure and makes big moves on MakerDAO. 

Earlier this week, the California Department of Financial Protection & Innovation (DFPI) filed a desist and refrain order against Nexo’s Earn Interest Product. The state authority claimed that Nexo was offering a security product that had not been cleared by the government for sale in the form of an investment contract. Nexo has suffered a takedown at the hands of regulators and made big moves, pulling 50% of wBTC held in MakerDAO out. 

Also read: Bitcoin mass adoption: Spain's largest telecom company accepts BTC and crypto

Nexo hit by regulatory push back, makes big moves

The California Department of Financial Protection & Innovation (DFPI) filed a desist and refrain order against Nexo’s Earn Interest Product. The DFPI was joined by seven other states Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont taking action against Nexo. 

Kalin Metodiev, the co-founder and managing partner of crypto lender Nexo, stated his firm was “surprised” by the way in which regulators publicly took action against the firm for securities violations. Metodiev explained that Nexo has tried to take responsibility and engaged in direct conversion with regulators like the Securities and Exchange Commission (SEC). 

Metodiev said, 

We were a little surprised by this news being thrown out there in public, you know, because this isn’t a process that just started this week. We have worked with our legal advisors in the U.S. that we have used for the last couple of years to navigate us specifically through these waters in these conversations.

While Nexo works with regulators and tackles the looming issues, crypto intelligence tracker Santiment has made note of big moves by the crypto lender in wrapped Bitcoin (wBTC), an Ethereum-based token backed one-to-one with Bitcoin. 

Analysts at Santiment identified Nexo’s big move, the crypto lender pulled out nearly 50% of wBTC held in Maker DAO. This has left $120 million in wBTC locked in a Collateralized Debt Position (CDP). A CDP is created when collateral is locked into a MakerDAO’s smart contract. It generates the decentralized stablecoin DAI. 

Analysts are monitoring Nexo’s moves to decipher the crypto lenders plans for its free assets. 

wBTC locked in CDPs

wBTC locked in CDPs

Interestingly, Nexo’s moves have pushed wBTC price to its lowest value in 2022. Analysts believes wBTC price is at risk of further decline if Nexo pulls wrapped Bitcoin out of Maker DAO. 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

SEC doubles down on TRON's Justin Sun lawsuit dismissing claims over jurisdiction

SEC doubles down on TRON's Justin Sun lawsuit dismissing claims over jurisdiction

The SEC says it has jurisdiction to bring Justin Sun to court as he traveled extensively to the US. Sun asked to dismiss the suit, arguing that the SEC was targeting actions taken outside the US.

More TRON News

XRP fails to break past $0.50, posting 20% weekly losses

XRP fails to break past $0.50, posting 20% weekly losses

XRP trades range-bound below $0.50 for a sixth consecutive day, accumulating 20% losses in the last seven days. Ripple is expected to file its response to the SEC’s remedies-related opening brief by April 22. 

More Ripple News

ImmutableX extends recovery despite $69 million IMX token unlock

ImmutableX extends recovery despite $69 million IMX token unlock

ImmutableX unlocked 34.19 million IMX tokens worth over $69 million early on Friday. IMX circulating supply increased over 2% following the unlock. The Layer 2 blockchain token’s price added nearly 3% to its value on April 19. 

More Cryptocurrencies News

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in

Bitcoin price briefly slipped below the $60,000 level for the last three days, attracting buyers in this area as the fourth BTC halving is due in a few hours. Is the halving priced in for Bitcoin? Or will the pioneer crypto note more gains in the coming days? 

More Bitcoin News

Bitcoin: BTC post-halving rally could be partially priced in Premium

Bitcoin: BTC post-halving rally could be partially priced in

Bitcoin (BTC) price briefly slipped below the $60,000 level for the last three days, attracting buyers in this area as the fourth BTC halving is due in a few hours. Is the halving priced in for Bitcoin? Or will the pioneer crypto note more gains in the coming days? 

Read full analysis

BTC

ETH

XRP