Nexo Seeks $3 Billion from Bulgaria, Citing Harm from Abandoned Criminal Investigation

Cryptocurrency lender Nexo initiated an arbitration request against the Republic of Bulgaria via the World Bank's International Centre for Settlement of Investment Disputes (ICSID) ICSID ).

The arbitration seeks $3 billion in damages related to a closed criminal inquiry, which Nexo claims adversely affected its aspirations for a US stock market listing and a sponsorship contract in soccer. The allegations revolve around damage to its public image and a downturn in shareholder value.

Bulgaria's finance ministry acknowledged that it received an arbitration request from the ICSID in a statement, revealing that it would be reviewed by a specialized interdepartmental committee which would later recommend subsequent actions.

The statement made it clear that any communications, including the one mentioned, shouldn't be interpreted as an acknowledgment of the claims or acceptance of any arbitral jurisdiction.

Bulgarian Authorities Withdraw Criminal Charges Against Nexo

In the previous year, the Bulgarian Prosecutor’s Office had investigated Nexo AG, conducting raids in Sofia and charging its founders with serious offenses. These charges included allegations of working within an organized crime syndicate for laundering money and committing fraud relating to taxes and computer systems.

However, the authorities wrapped up their investigation into Nexo in December, citing insufficient evidence for any criminal wrongdoing. The primary rationale for this decision was that cryptocurrency assets cryptocurrencies are not classified as financial instruments in Bulgaria and thus fall outside the scope of regulations governing payments and services, as stated in an official release.

The allegations pertained to acts occurring between 2018 and January 2023, charging defendants Antoni Trenchev, Kosta Kanchev, Kalin Metodiev, and Trayan Nikolov with involvement in an organized criminal syndicate. Nexo has firmly denied any misconduct, claiming that the inquiry was driven by political motives—claims that the prosecutors had dismissed earlier.

Founded in 2018 by former Bulgarian politician Antoni Trenchev, Nexo operates as a cryptocurrency lending platform and ecosystem. It provides a range of financial services for digital assets, allowing users to buy, sell, trade, and borrow cryptocurrencies.

Currently, Nexo manages assets for over 6 million users across 200 different jurisdictions.

Nexo Faces Regulatory Hurdles in the United States

As American regulators ramp up scrutiny over allegations at prominent cryptocurrency companies, it is fairly rare for a crypto enterprise to claim reparations from a nation regarding a discarded investigation. The ICSID has previously mandated several countries—like Pakistan, Ecuador, and Venezuela—to disburse significant damages to corporations. illicit activities Previously, Nexo had withdrawn its offerings from the US market. Additionally, the firm reached a settlement agreement to pay $45 million to resolve

claims brought forth by the US Securities and Exchange Commission (SEC) and state regulatory bodies. These claims related to the company's non-compliance in registering its cryptocurrency lending products. Recently, a California resident and Nexo customer, John Cress, has filed a complaint against the cryptocurrency lender, alleging that the firm engaged him through ‘fraudulent inducements’ to take out loans. Cress claims that Nexo misled him to encourage borrowing against his deposited digital assets and invest in complex financial products instead of earning interest on his holdings.

Nexo and its co-founder refute Cress’s accusations, asserting they lack any merit.

In the recent arbitration claim against Bulgaria, following the country's past allegations of the company's involvement in criminal activities and laundering, Nexo is now seeking restitution, citing damage to its reputation.

US Securities and Exchange Commission