Nexo Seeks $3 Billion in Damages from Bulgaria Over Investigation

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Nexo, a cryptocurrency lending platform, has taken a significant legal step against the Republic of Bulgaria, seeking $3 billion in damages. This arbitration claim, filed through the World Bank’s International Center for Settlement of Investment Disputes (ICSID) in Washington, DC, centers around allegations that Bulgaria engaged in wrongful and politically motivated actions against the company.

The origins of this conflict go back to an investigation launched by the Bulgarian Prosecutor’s Office in early 2023. Nexo’s offices were raided on allegations of involvement in an organized crime group seeking to profit from crypto-lending. Four Bulgarian citizens, including Nexo co-founders Kosta Kanchev, Antoni Trenchev, Trajan Nikolov and Kalin Metodiev, were charged following these raids. In December 2023, however, the case was dismissed due to lack of evidence and the lack of a legal framework in Bulgaria for crypto assets.

Nexo claims the investigation is unfounded and has had a serious impact on its business operations and reputation. The company said it was in the process of working with US banks on an initial public offering (IPO), with a valuation estimated at between $8 billion and $12 billion. Additionally, Nexo was reportedly close to finalizing a sponsorship deal with a major European football club that would greatly increase its global exposure. Both lucrative opportunities were missed due to the investigation.

In addition to these setbacks, Nexo also faced legal challenges in the United States. The company has agreed to a $45 million settlement with the US Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) over its interest-earning product. This led to Nexo discontinuing the product in April and ultimately shutting down its US operations, citing a lack of regulatory clarity.

Nexo’s legal team, led by US law firm Pillsbury Winthrop Shaw Pittman LLP, argued that the investigation by the Bulgarian authorities was unjustified and repressive, resulting in significant financial and reputational damage. The suit, filed by Nexo’s Swiss subsidiary Nexo AG, seeks to recover lost opportunities and damages caused by the allegations.

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