Nexo, a popular crypto lending platform, recently submitted an arbitration claim against the Republic of Bulgaria at the International Centre for Settlement of Investment Disputes (ICSID), alleging monetary losses and halted investment opportunities resulting from “politically motivated” investigations instigated by the country. Nexo is reportedly seeking $3 billion in damages from the arbitration proceedings.
The company announced the move in a January 24, 2024, statement on its website, detailing foiled business opportunities for the firm as a result of the now-dismissed criminal investigations launched by the Sofia City Prosecutor’s Office that absolved the cryptocurrency lending firm of any wrongdoing. Recall that after a dramatic raid of Nexo’s office last year, Bulgarian prosecutors dropped all criminal charges against the crypto lending firm and its leadership, citing a lack of evidence of illicit activity. However, the arbitration claim at the ICSID will reopen the case, discussing the possibilities of financial compensation to the cryptocurrency firm.
Bulgaria vs. Nexo: How it All Started
Over one year ago, Bulgarian officials raided over 15 addresses related to Nexo’s business activities in Bulgaria in a widely-reported crackdown on the crypto lending firm for alleged violation of international financial sanctions against Russia.
Nexo immediately denied all allegations of wrongdoing through a company spokesperson who described the allegations and subsequent raids as absurd, contending that its KYC/AML policies are some of the most stringent in the industry. Additionally, the company took to its social media pages to deny any allegations of wrongdoing and instead reinforced its strict anti-money laundering policies.
Amid the continuous raids on Nexo, the Bulgarian Prosecutor’s Office described the Nexo enterprise as “illegal and criminal” during a press conference in Bulgaria. It also announced it was investigating the company for fraud, tax evasion, and money laundering, among other crimes. After over a year of thorough investigations, raids, forensic audits, questioning, and account monitoring, the Republic of Bulgaria Prosecutor’s Office said in a December 22, 2023, statement that Nexo had committed no crimes.
“Due to the foregoing, the supervising prosecutors concluded that no crime had been committed and terminated the criminal proceedings,” the statement’s (translated from Bulgarian) conclusion read, vindicating the crypto lending firm after over one year of continued oppression from the country’s authorities.
Nexo Co-Founder-Bulgarian Investigation is Politically Motivated
Antoni Trenchev, a former Bulgarian member of the National Assembly and Nexo co-founder, described the attacks on Nexo and its leadership as unjustified and politically motivated. Reacting to the dismissal of charges, Trenchev vowed to secure financial compensation for the crypto lending company by all legal means.
Prosecutors also instituted criminal proceedings against four Nexo executives, including co-founder Antoni Trenchev, executive chairman and co-founder Kosta Kantchev, managing partner Kalin Metodiev, and chief operating officer Trayan Nikolov. The prosecutors dropped all the criminal cases when it ended the investigation against Nexo, affirming that none of them committed any crimes warranting prosecution.
Nexo Alleges Reputational Damages, Seeks $3 Billion Settlement
In a statement announcing the arbitration filing against the Republic of Bulgaria, Nexo detailed how it lost opportunities, exposure, and money because of the ‘politically motivated’ actions against the company and its executives. According to the statement, Nexo reportedly lost a multi-year alliance with a “top European football club,” a partnership that would expose the cryptocurrency firm to the club’s 330 million followers. Nexo touted the partnership as game-changing, as it would have positioned the crypto lender as the said club’s official digital wallet.
Nexo also revealed how it had to back out of a partnership with three leading US investment banks for an initial public offering on a major US stock exchange with a valuation between $8 billion and $12 billion. Overall, Nexo alleged reputational damage, missed opportunities, and destruction of company value, demanding $3 billion in damages from the Bulgarian government to cover its losses.
The ICSID is a Washington-based World Bank initiative that handles arbitration between sovereign states and firms. While it had previously awarded multi-billion dollar fines to companies against sovereign states, predicting the outcome of the “Nexo vs Bulgaria” row is a tough one due to the intricacies of the case.
The Bulgarian Ministry of Finance failed to comment publicly about its response.
