Cryptocurrency lending platform Nexo is seeking $3 billion in damages from Bulgaria, alleging an aborted criminal investigation by Bulgarian authorities adversely impacted the company’s plans for a U.S. stock market listing and a soccer sponsorship deal. Nexo AG, the Swiss unit of Nexo Capital based in the Cayman Islands, claims that the investigation tarnished its reputation and led to a decline in shareholder value. The legal documents, filed with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), outline the company’s case. The ICSID, a Washington-based international arbitration institution, registered the case on January 18.
Bulgaria’s finance ministry acknowledged receiving an arbitration request from the ICSID, indicating that the matter would be reviewed by a specialized inter-departmental committee, which would propose the next steps. The controversy began in January 2023 when Bulgarian prosecutors initiated an investigation into Nexo AG, conducting raids and charging its founders with offenses such as participating in an organized crime group to launder money and committing tax and computer fraud. However, the case was dropped last month due to a lack of evidence, with prosecutors noting the absence of a legal framework for crypto asset services in Bulgaria.
Nexo, co-founded by former Bulgarian lawmaker Antoni Trenchev, vehemently denied any wrongdoing and asserted that the investigation was politically motivated, a claim previously refuted by prosecutors. This legal dispute is noteworthy as it involves a cryptocurrency firm seeking compensation from a country over a dropped investigation. The International Centre for Settlement of Investment Disputes has previously ordered countries, including Pakistan, Ecuador, and Venezuela, to pay substantial damages to companies.
Cryptocurrency lenders like Nexo function as banking entities in the crypto sphere, offering customers interest on deposited cryptocurrencies. In response to regulatory challenges, Nexo phased out its U.S. products and services last year, agreeing to a $45 million settlement to resolve charges from the U.S. Securities and Exchange Commission and state regulators for failing to register its crypto asset lending product. As the case unfolds, it underscores the evolving dynamics between cryptocurrency firms and government authorities worldwide.
In a separate development, Senate Bill No. 339 (SB 339) proposed by Senator Saddam Azlan Salim is currently under discussion in the Senate. If approved, the bill could bring significant changes, including eliminating the need for money transmitter licenses for crypto miners in the state. It also aims to prevent discrimination against miners and exempts cryptocurrency issuers and sellers from securities registration requirements under certain conditions. The bill, if passed into law, could have far-reaching implications for the crypto industry in the state.
Digital Assets Desk