Cryptocurrency lending platform Nexo is seeking $3 billion in damages from the Bulgarian government following the termination of a criminal investigation. The claim arises from allegations of reputational damage and significant shareholder losses due to the abandoned probe.
Arbitration Claim and World Bank's Involvement
Nexo has unveiled the specifics of its $3 billion arbitration claim against the Republic of Bulgaria, revealing that it has submitted the claim through the World Bank's International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C., United States.
Dropped Investigation and Initial Charges
The Bulgarian prosecutors initially charged four Bulgarian nationals, including Nexo co-founders Kosta Kanchev and Antoni Trenchev, with participating in an organized criminal group from 2018 to 2023 aimed at profiting from crypto lending. However, in December 2023, Bulgarian authorities dropped the case, citing a lack of legal framework for crypto assets as one of the reasons.
Legal Documents and Impact on Nexo
Nexo filed legal documents through its Swiss subsidiary, Nexo AG, with the ICSID on January 18. The company claims that it was in the process of collaborating with three U.S. banks for an initial public offering with an estimated valuation of $8 to $12 billion. Additionally, Nexo was on the brink of finalizing a multi-year deal with an undisclosed major European football club, potentially exposing Nexo to over 330 million fans worldwide.
Setbacks and Growth Impediments
Despite continuing its operations, Nexo asserts that it suffered setbacks and delays as a result of the dropped investigation. Nexo's co-founder Antoni Trenchev expressed his commitment to exploring all available legal avenues to secure financial compensation for the company's losses.
Response from Bulgarian Finance Ministry
A separate report from Reuters acknowledges that the Bulgarian finance ministry has received a request for arbitration from the ICSID, which is now under review.
Regulatory Challenges and Settlement with U.S. Regulators
Nexo's troubles in the United States include a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) over the failure to register 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.
Exit from the U.S. Market
Following the January raid, Nexo announced its decision to wind down operations in the United States, citing a "lack of regulatory clarity" as the primary reason for its exit from the U.S. market.