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Troutman Pepper Weekly Consumer Financial Services Newsletter


To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

  • On January 19, the Securities and Exchange Commission (SEC) filed a consent order, memorializing crypto-lending firm Nexo Capital, Inc.’s (Nexo) assent to pay a $45 million fine to remedy its offering of an interest-bearing cryptocurrency deposit product called the “Nexo Earn Interest Product” (EIP), which the SEC alleged constituted the offering and selling of unregistered securities in violation of federal securities law. Critically, under the consent order, Nexo must “cease the EIP to all U.S. investors by April 1, 2023 and [must] exit the U.S. entirely shortly thereafter.” For more information, click here.
  • On January 18, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an order, identifying Hong Kong-based cryptocurrency exchange Bitzlato Limited (Bitzlato) as a “primary money laundering concern” due to Bitzlato’s alleged connection to illicit Russian finance and ransomware activities. FinCEN’s order prohibits all “covered financial institutions” from transmitting any funds involving Bitzlato. Notably, FinCEN alleged that public reporting demonstrated that Bitzlato did not effectively implement policies and procedures designed to combat money laundering and illicit finance. For more information, click here.
  • On January 18, the CFPB released the updated “Mortgage Servicing Examination Procedures,” providing transparency to stakeholders about how we do our work. The examination procedures describe the types of information that CFPB examiners gather to evaluate mortgage servicers’ policies and procedures; assess whether servicers are complying with applicable laws; and identify risks to consumers related to mortgage servicing. The updated examination procedures include CFPB guidance released since the last update in June 2016. For more information, click here.
  • On January 18, the U.S. Department of Justice (DOJ) charged Anatoly Legkodymov, the founder of Hong Kong-based cryptocurrency exchange Bitzlato, with conducting a money transmitting business that transmitted illicit funds and with failing to develop and implement an effective KYC/AML program in violation of the Bank Secrecy Act. According to the DOJ, Bitzlato had been responsible for processing approximately $4.58 billion worth of cryptocurrency transactions since 2018. For more information, click here.
  • On January 17, during an interview with Bloomberg, CFTC Commissioner Caroline Phan noted that she believes “crypto financial instruments should be held to the same standard as other financial instruments,” and she is hopeful that the CFTC and other federal regulatory agencies will provide more crypto-related guidance throughout 2023. For more information, click here.
  • On January 17, FinCEN published two notices and requests for comment in the Federal Register related to the reporting process the agency intends to use to collect data. Specifically, FinCEn is issuing a final rule, requiring certain entities to file with FinCEN reports that identify two categories of individuals: the beneficial owners of the entity and individuals who have filed an application with specified governmental authorities to create the entity or register it to do business. These regulations implement Section 6403 of the Corporate Transparency Act, enacted into law as part of the National Defense Authorization Act for Fiscal Year 2021, and describe who must file a report, what information must be provided, and when a report is due. Comments are due by March 20. For more information, click here.
  • On January 17, Acting Comptroller of the Currency Michael Hsu delivered remarks at the Brookings Institute about the limits of large bank manageability. He stated that “[e]nterprises can become so big and complex that control failures, risk management breakdowns, and negative surprises occur too frequently — not because of weak management, but because of the sheer size and complexity of the organization.” He spoke about his belief that the “most effective and efficient way to successfully fix [these] issues … is to simply if — by divesting businesses, curtailing operations, and reducing complexity.” For more information, click here.
  • On January 17, the World Economic Forum (WEF) released a “toolkit” for decentralized autonomous organizations (DAOs). The “toolkit” is comprised of a set of resources that the WEF hopes will help developers, policymakers, and stakeholders in the crypto industry “realize the full potential” of evaluating, engaging, or developing DAOs. The WEF’s toolkit is segmented into five sections:
    • What are DAOs?;
    • DAO operations;
    • DAO governance;
    • Legal structures; and
    • Recommendations.

    For more information about the WEF’s DAO toolkit, click here. For more information about DAOs, click here.

State Activities:

  • On January 19, New York Attorney General Letitia James and a multistate coalition obtained up to $24 million from cryptocurrency companies Nexo, Inc. and Nexo Capital, Inc. (Nexo) for “engaging in the unregistered offer and sale of securities and commodities” and for allegedly “lying to investors about their registration status.” The agreement represents the culmination of a civil lawsuit brought by the AG in September 2022 and administrative actions by securities regulators in nine other states. Nexo is now banned from the New York securities industry for five years and must notify its investors to withdraw their assets from the platform. For more information, click here.
  • On January 18, the New York Department of Financial Services (DFS) announced that it adopted an updated check cashing regulation initially proposed in June 2022. The regulation implements a new method for calculating fees that accounts for the needs of licensees and consumers who utilize check cashing services. In 2005, New York became the only state to grant automatic increases to the maximum percentage check cashing fee, anchoring the increases to the Consumer Price Index (CPI). However, this method did not account how inflation disproportionately impacts underserved New Yorkers who rely on check cashing services to access their funds. The regulation eliminates automatic increases based on CPI, creating instead a two-tier system of fees for check cashers. For more information, click here.


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