Nexo Claims $3 Billion from Bulgaria Alleging Damages from Dropped Criminal Investigation
In Brief
Nexo filed a $3 billion arbitration claim against Bulgaria linked to an abandoned criminal investigation, that led to reputational damage.
Cryptocurrency lender Nexo filed an arbitration claim against the Republic of Bulgaria through the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).
The claim, seeking $3 billion in damages, is linked to an abandoned criminal investigation that Nexo asserts negatively impacted its intention for a United States stock market listing and a soccer sponsorship deal. The company alleges that the investigation led to reputational damage and a decline in shareholder value.
Bulgaria’s finance ministry confirmed receipt of an arbitration request from the ICSIDn the statement, indicating that the request would undergo review by a specialized inter-departmental committee, which would subsequently recommend the next course of action.
The statement clarified that any form of communication, including the mentioned one, should not be construed as an admission regarding the substance of any claims or as an acceptance of any arbitral jurisdiction.
Bulgarian Authorities Drop Criminal Charges Against Nexo
Last year, the Bulgarian Prosecutor’s Office initiated an investigation into Nexo AG, conducting raids on offices in Sofia and charging its founders with offenses. These charges included accusations of participating in an organized crime group to launder money and commit tax and computer fraud.
Nevertheless, the entity concluded its investigation into Nexo in December, citing a lack of evidence of criminal activity. The primary justification for the decision was that cryptocurrency assets are not categorized as financial instruments in Bulgaria and fall outside the regulations governing payment services and systems, as outlined in an official statement.
The charges, covering the period from 2018 to January 2023, accused defendants Antoni Trenchev, Kosta Kanchev, Kalin Metodiev, and Trayan Nikolov of participating in an organized criminal group. Nexo had refuted any wrongdoing and claimed that the investigation was politically motivated—an assertion that prosecutors had previously denied.
Established in 2018 by former Bulgarian lawmaker Antoni Trenchev, Nexo operates as a cryptocurrency lending platform and cryptocurrency finance ecosystem. It extends professional financial services to the digital assets realm, enabling users to buy, sell, trade, and borrow cryptocurrencies.
Nexo presently oversees assets for over 6 million users across 200 jurisdictions.
Nexo Faces Challenges in the United States
While US regulators have intensified efforts to address alleged illicit activities at leading cryptocurrency firms, it’s uncommon for a cryptocurrency company to pursue compensation from a country for a dropped investigation. The ICSID has previously compelled several countries, such as Pakistan, Ecuador and Venezuela, to pay substantial damages to companies.
Previously, Nexo phased out its products and services in the United States. Moreover, the company reached an agreement to pay $45 million to settle charges filed by the US Securities and Exchange Commission (SEC) and state regulators. These charges pertained to the company’s failure to register its cryptocurrency asset lending product.
Recently, a Nexo user in California, John Cress, filed a complaint against the cryptocurrency lender, alleging harm due to the firm’s “fraudulent inducement” to take out loans. Cress claimed that Nexo made false assertions to encourage him to borrow against the digital assets he deposited and invest in complex financial products instead of earning interest on his own assets.
Nexo and its co-founder rejected the claims made by Cress, stating that they are of no substance.
In the recent claim against Bulgaria, following the country’s previous allegations of the company in criminal activities and money laundering, Nexo now appeals for justice, citing reputational damages.
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
