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Nexo is an online cryptocurrency loan service that offers financial benefits for storing crypto assets on platforms such as Bitcoin and Ethereum. The cash-based lending platform is backed by well-known investor and TechCrunch founder Michael Arrington.

Since its launch in 2017, Nexo has processed more than 1.5 Billion dollars from 2+ Million users across 200 jurisdictions and supports over 40 fiat currencies. The lending service has gained widespread popularity as an alternative crypto investment method and storage option for individuals and companies. It is a growing part of the emerging decentralized finance industry that is rapidly gaining momentum.

History

Nexo is started in 2017 in Bulgaria by Kosta Kanchev, Antoni Trenchev, Georgi Shulev. Shulev leaves in 2019 and a legal battle begins. Initially the company was called NexoBank, but the 'bank' suffix is removed because in many countries, the law prohibits financial companies from bearing the name "bank" in their name if they don't have a banking license.As seed funding, Nexo raises 52.5m euros in funding from the European Union. Initial Coin Supply (ICO). In its first months, the company branded itself as related to Credisimo. Trenchev and Kanchev told Capital in 2021 that this was just a marketing gimmick, without the two having a common activity or one funding the other. According to unofficial information, the owner of "Credissimo" Sokol Yankov is not on good terms with Trenchev and Kanchev. His company officially distanced itself from Nexo in September.

Legal structure

Legally, Nexo is not a single company. It operates through multiple companies in different jurisdictions: in the US (Nexo Financial LLC; the company is registered in the State of Delaware, which is an offshore area), the United Kingdom (Nexo Financial Services LTD), Estonia (Nexo Services OU), Lithuania (Nexo Services UAB), Switzerland (Nexo AG), Hong Kong (Nexo Finance Limited), the Cayman Islands (Nexo Capital Inc.) and the Marshall Islands (Nexo A.G.; identical name to the Swiss company), as well as the Bulgarian company "NDS", which actually develops the product.

Legal troubles

In subsequent lawsuits against the company, they are most often against Cayman Nexo Capital. In 2021, Kanchev told Capital that the consolidation of companies under a common umbrella is already underway, but by the beginning of 2023 this does not seem to have happened. This tangle of companies leads to legal problems for Nexo.

Estonia revokes license

The first country in which there is a problem is Estonia, which in 2018 gave Nexo Services OU licenses to offer wallet-as-a-service, to convert virtual currencies into hard currencies, as well as to operate as a financial institution. In 2020 and 2021 it takes them away, but the company acquires them in neighboring Lithuania.

Official and unofficial charges against Nexo

Over the years, Nexo has been the subject of numerous charges. Some of them turn into real lawsuits against the company, while others remain only in the world of crypto enthusiasts. The first serious accusation, albeit unofficially, is from 2020, when users said that on the night of March 12-13, when cryptocurrencies collapsed by 50%, Nexo changed its rules so that they did not say that customers "retain 100% of the ownership of their digital assets." Officially, Nexo denies making such changes, but in 2021, Capital published the old rules of the platform

Nexo Finance Accused of Being Behind Zeus Capital and Chainlink Short

In July 2020. Nexo has been accused on social media of trying to crash the price of the cryptocurrency Chainlink by fabricating a false report from its employee, Simeon Rusanov. The company has officially denied any connection to the fake report released by the name Zeus Capital. However, former Nexo employees confirmed to Capital in 2021 that they knew about the existence of the report, whose draft Capital has.

Jeong vs. Nexo

At the end of the same year, Nexo liquidated the positions of all its clients who took out loans with collateral on the cryptocurrency Ripple. This led to the first major lawsuit against the company, Jeong vs. Nexo in a California court. In the case, for the first time, Nexo's corporate structure is officially raised as a question.

2021 Suspending of the depositing product in NY and other states

The biggest problems are in the United States. There are multiple licenses on Nexo's website, and the company itself claims to be the "leading licensed and regulated financial institution" in the crypto sector. In 2021 and 2022, however, first New York and then other states took action and, in some cases, filed charges against the company. The main reason was Nexo's deposit product, which offers interest rates of up to 12% on the dollar equivalent. However, the authorities' documents also claimed that although a Nexo company has a license, the activity itself is carried out by another company that does not.

At the end Nexo has announced that it will phase out of the U.S. market.

In 2021, the New York State Public Prosecutor's Office sent a letter suspending Nexo's operations in the state. A year later, in September 2022, New York again launched legal proceedings against the company with charges of unlicensed banking and non-compliance with the operating ban. Seven other states banned the company's deposit product, with additional non-public details about the company's finances in each of the documents. Perhaps most important is the claim of the Kentucky authorities, who say that if Nexo did not count its own NEXO token as an asset, the company would be in fact bankrupt. According to Kentucky, NEXO's real value is $0 because Nexo and its employees hold more than 95% of all coins.

Otherwise, it is clear from the documents that by the end of July 2022 Nexo has over 93 thousand. the U.S. customer of his Earn product, which had about $800 million in accounts. Dollars. This is also a rare look at the finances of Nexo, which operates through multiple companies and its revenues globally are unknown. In Bulgaria, the company operates through the company "NDS", which houses the team that supports the product itself. For 2021, NDS reported EUR 27.8 million. Lv. revenues and $4.1 million. Lv. As of July 2022, the company employed 550 people.

Three Irish entrepreneurs sue Nexo for at least $59 million Dollars

At the end of 2022, three Irish entrepreneurs, owners of the Maltese fintech software company RedAcre, filed a lawsuit against Nexo. In it, they accuse the Bulgarian company (and in particular its Cayman company) of the assets of the three, totaling 126m euros, in 2021. first were frozen, and subsequently blackmailed into selling much of it at a 60% discount. The lawsuit is worth at least $59 million. Capital, describing in detail the case and the mathematics behind the lawsuit in November. Nexo confirms the allegations.

2023 Bulgarian Prosecutor's office raids offices

Early this morning on Thursday, January 12th, 2023, the prosecutor's office and the State Agency for National Security (SANS) launched a raid on buildings linked to Bulgarian crypto-bank Nexo.