Crypto Lender Nexo Dissolves UK Entities as Legal Ambiguity Surrounds

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Key takeaways:

  • Crypto lender Nexo had dissolved two of its U.K.-based companies.
  • Nexo is “rethinking the way” it approaches “servicing clients” but is not contemplating leaving the U.K. market.

On May 11, Bloomberg News reported that London-based cryptocurrency lender Nexo (NEXO) had dissolved two of its U.K.-based companies.

According to the Bloomberg piece, the lender is also being looked into in Bulgaria for allegedly participating in a criminal organization. The lender requested that Nexo Financial Services Ltd. and Nexo Clearing and Custody Ltd. be shut down by the U.K. authorities.

Co-founder of Nexo Antoni Trenchev alleged that branch closures were brought on by corporate “restructuring.” Trenchev claims that Nexo is “rethinking the way” it approaches “servicing clients” but is not contemplating leaving the U.K. market.

Regulators in the U.S. have expressed severe skepticism about cryptocurrency-based interest-bearing accounts, criticizing them for having exceptionally high savings rates compared to conventional savings accounts.

After massive sums of money were lost on numerous now-defunct crypto loan sites, including Celsius, Voyager, and later BlockFi, scrutiny grew around the middle of 2022. Although Nexo stressed that its financial situation was not as precarious as that of these other companies, the Securities and Exchange Commission (SEC) would continue investigating it and bringing charges against it in the coming months. Nexo made the decision to leave the United States in December due to regulatory issues.

Prosecuting solicitors in Bulgaria filed charges against four people in January of this year as a result of their investigation into Nexo. The Bulgarian nationals are charged with creating an organized crime gang that engages in money laundering, unlawful banking, tax and internet fraud, and other offenses.

But after giving the accusations some thought, Trenchev, a well-known former Bulgarian lawmaker, called them “ludicrous.” The allegations, however, were never proven false as numerous Bulgarian organizations attested to Nexo’s innocence.

The lender has been involved in other legal disputes in addition to this one. The lender was fined $22.5 million by the U.S. SEC for failing to register its retail lending product. Nexo paid a $45 million penalty to the SEC in January as part of a settlement. The investigation was carried out by around 17 different state securities authorities, who concurred with the conditions of the settlement reached with the crypto lender.

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Deep Dalal
Deep Dalal

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