Nexo is a crypto lending platform that was founded by Bulgarian entrepreneurs in 2017. In January 2023, the Bulgarian authorities accused Nexo and its founders of money laundering and computer fraud, and raided their offices in Sofia.
The investigation caused significant damage to Nexo’s reputation, market value, and expansion plans. Nexo claims that it lost opportunities such as a US stock market listing and a soccer sponsorship deal because of the investigation.
The authorities dropped the investigation in December 2023 due to lack of evidence and legal framework for crypto services. However, Nexo decided to seek compensation for the alleged harm caused by the investigation.
How Nexo is suing Bulgaria
In its arbitration claim, Nexo is seeking $3 billion in damages, which is equal to three times the amount of funds that were frozen during the investigation. Nexo alleges that the investigation was politically motivated and that the Bulgarian government acted in bad faith. The company also claims that the investigation caused it to lose valuable customers and partners.
"We've lost or greatly postponed chances, and our growth trajectory has slowed drastically. Ten months ago, I personally pledged that we would investigate every legal avenue to obtain monetary recompense for Nexo", Trenchev said.
Nexo's Legal Strategy
Nexo is relying on the World Bank's ICSID to resolve its dispute with the Bulgarian government. The ICSID is a neutral arbitration forum that is designed to settle investment disputes between governments and foreign investors.
Impact of Nexo's claim
The outcome of Nexo's claim could have a significant impact on the cryptocurrency industry. If Nexo is successful, it could send a message to other governments that they should be cautious about launching investigations into cryptocurrency companies. The claim could also make it more difficult for cryptocurrency companies to operate in jurisdictions that are hostile to the industry.