The cryptocurrency lending platform Nexo has taken legal action against the Republic of Bulgaria, seeking $3 billion in damages. This move comes after Nexo accused Bulgaria of engaging in wrongful and politically motivated actions and unjustified criminal investigations. The allegations stem from events that unfolded over the past year, including investigations into money laundering and a subsequent dropping of charges by Bulgarian prosecutors.
Investigations and charges dropped
In December 2023, the Bulgarian Prosecutor’s Office concluded its investigation into Nexo, stating that there was no evidence of criminal activity related to money laundering. Initially, Bulgarian authorities had alleged that Nexo executives were involved in an organized criminal group from 2018 to 2023 aimed at profiting from crypto lending. The charges were brought against four Bulgarian nationals, including Nexo co-founders Kosta Kanchev and Antoni Trenchev, Trayan Nikolov, and Kalin Metodiev, following a raid on Nexo’s offices at the beginning of 2023. The charges dropped partially due to Bulgaria’s lack of a legal framework covering crypto assets.
Nexo, through its Swiss subsidiary Nexo AG, submitted a $3 billion arbitration claim to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C., on January 18, 2024. This institution specializes in resolving legal disputes between international investors and nation-states.
The cryptocurrency lending platform argues that the investigations and charges have harmed its brand and reputation, leading to the loss of significant business opportunities. Nexo claims it was actively working with three U.S. banks on an initial public offering (IPO) with an initial valuation between $8 to $12 billion. Additionally, the company asserts that it was on the brink of finalizing a multi-year deal with an undisclosed major European football club, which would have provided it exposure to over 330 million supporters worldwide.
Impact on Nexo
Antoni Trenchev, one of Nexo’s co-founders, expressed that while the business continues to operate, it has been significantly affected by the investigation’s aftermath. He stated, “Our growth path has been slowed down and opportunities lost or significantly delayed. I personally promised 10 months ago that we would explore all legal means available to secure financial compensation for Nexo.”
Furthermore, Nexo’s troubles in the United States were compounded when it agreed to a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) following its failure to register the offer and sale of its Earn Interest Product. This settlement resolved cases brought by various U.S. state securities regulators, leading to the discontinuation of the product in April.
In December 2023, Nexo also announced its decision to wind down operations in the U.S., citing “a lack of regulatory clarity” as the primary reason for its exit.
In response to Nexo’s arbitration claim, the Bulgarian finance ministry acknowledged receipt of the request for arbitration from the ICSID, indicating that it would be reviewed.