Nexo Seeks $3 Billion in Damages from Bulgaria Over Dropped Investigation

Cryptocurrency lender Nexo is pursuing $3 billion in damages from Bulgaria, alleging that an aborted criminal investigation adversely impacted its plans for a U.S. stock market listing and a soccer sponsorship deal. Legal documents seen by Reuters reveal that Nexo AG, a Swiss unit of Nexo Capital based in the Cayman Islands, claims the investigation damaged its reputation and eroded shareholder value. The case has been registered with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), an international arbitration institution dealing with disputes between investors and states.

The ICSID, based in Washington, registered the case on Jan. 18, though specific details about the damages sought have not been confirmed by the organization. Bulgaria's finance ministry acknowledged receiving an arbitration request from the ICSID, which will be reviewed by a specialized inter-departmental committee for further action. The ministry stated that such communications should not be seen as an admission of any claims or acceptance of arbitral jurisdiction.

Bulgarian prosecutors initiated an investigation into Nexo AG in January 2023, involving raids on offices in Sofia and charging its founders with offenses such as participating in an organized crime group for money laundering and committing tax and computer fraud. However, the case was dropped last month, with prosecutors citing a lack of evidence of criminal activity and the absence of a legal framework for crypto asset services in Bulgaria.

Nexo, co-founded by former Bulgarian lawmaker Antoni Trenchev, has consistently denied any wrongdoing and contends that the investigation was politically motivated, a claim previously refuted by prosecutors. It is unusual for a crypto firm to seek compensation from a country over a dropped investigation, especially as regulatory scrutiny on crypto firms intensifies globally.

The International Centre for Settlement of Investment Disputes has previously compelled countries like Pakistan, Ecuador, and Venezuela to pay substantial damages to companies. While Reuters could not independently verify Nexo's claimed damages, Antoni Trenchev, in an interview earlier this month, refrained from disclosing the banks involved in any potential listing or the European soccer club with which sponsorship talks ended.

Founded in 2018, Nexo phased out its U.S. products and services last year, agreeing to a $45 million settlement with the U.S. Securities and Exchange Commission and state regulators over allegations of failing to register its crypto asset lending product.

By fLEXI tEAM