The California Department of Financial Protection and Innovation has imposed a $500,000 penalty on crypto platform Nexo Capital Inc. for operating without a required lender's license and failing to meet consumer protection standards. The action targets loans issued to thousands of California borrowers between 2018 and 2022.
On January 14, 2026, the California Department of Financial Protection and Innovation (DFPI) issued a consent order against Nexo Capital Inc., a Cayman Islands-based company part of the Nexo group, which manages over $11 billion in assets. The group provides various crypto services, including the Credit Line product that offers loans in fiat or cryptocurrency backed by crypto collateral.
DFPI found that Nexo Capital originated loans to 5,456 California borrowers from July 2018 to November 2022 without holding the necessary finance lender license under the California Financing Law (CFL). An affiliated entity, Nexo Financial LLC, does possess such a license, but regulators determined that Nexo Capital could not rely on it for its activities. Additionally, the company violated underwriting rules by not properly assessing borrowers' ability to repay, relying instead on overcollateralization, which DFPI deemed insufficient.
These practices also breached the California Consumer Financial Protection Law (CCFPL), which prohibits unlawful acts in consumer financial services. As a result, DFPI ordered Nexo Capital to pay the $500,000 fine, halt all loan activities in violation of state laws, and transfer California consumer funds to the licensed Nexo Financial LLC. The company must notify affected consumers and post the transfer notice on its social media.
This enforcement comes after Nexo withdrew from the U.S. market in late 2022 amid similar state actions, including a $22.5 million multistate settlement. Recently, Nexo announced plans to re-enter the U.S., citing a more favorable environment under the Trump administration. The case underscores ongoing state-level scrutiny of crypto firms, especially with California's Digital Financial Assets Law licensing requirements set to begin on July 1, 2026, mandating licenses for broad digital asset activities like exchanging or storing crypto.
