Nexo is a European fintech company that provides instant dicryptocurrency-backed loans for digital asset owners. The Nexo platform is powered by a European fintech group that has been involved in online consumer lending since 2007. The Nexo platform launched in 2017 and is based in Zug, Switzerland.^[1][2]

History

Nexo was founded by Antoni Trenchev and Kosta Kantchev in 2017. The company has raised over $52.5 million in funding.

Around early August 2020, Nexo announced that its token holders would be paid over $6.1 million in dividends on August 15, 2020. This is more than double what they paid out the year prior ($2.4 million). The payout consists of 30% of the company's net profits for the period between June 30, 2019, and June 30, 2020. In a statement, Antoni Trenchev, co-founder and managing partner of the company, explained,^[3]

Our profit unequivocally showcases Nexo’s stellar development and staunch resilience to what are perhaps the toughest market conditions since the 2007 economic crisis,

Overview

The NEXO Token is backed by the underlying assets of Nexo’s loan portfolio.

NEXO Tokens payout 30% in dividends from the company’s profits each month to NEXO Token Holders. The tokens also offer additional utility features such as discounted interest rates on crypto-backed loans and are accepted as collateral on the Nexo Platform.

Notable Clients

In April 2019, Brock Pierce used more than three million dollars in bitcoin as collateral to purchase a 1.2 million renovated chapel-turned-home in Amsterdam. This became Nexo's first-ever crypto-backed mortgage.^[4][5]

Chainlink Collaboration

In early July 2020, it was announced that Nexo and Chainlink were collaborating in an effort to continue and enhance the adoption of digital assets.

Chainlink is joining with Nexo by incorporating their oracle system in Nexo's trading and lending procedures, in turn improving the efficiency and security of the platform. Nexo's platform will also benefit from the partnership with the increase of both greater loan volumes and custody of funds.

On the collaboration, Nexo Co-founder Antoni Trenchev stated,

“Nexo’s mission is to bridge the gap between digital and traditional finance and our developing collaboration with Chainlink brings us a step closer to achieving this. We are very much on the same page — both in terms of how our respective services currently align, and in terms of our shared vision for a digital, decentralized future of finance. We’re thrilled to have them on board.”

Chainlink Co-founder Sergey Nazarov also commented on the benefits of the union of Nexo and Chainlink, stating,

“We’re excited to bring Chainlink’s secure and reliable oracle solutions to Nexo’s popular lending platform to enable users to independently verify on-chain the interest and collateralization rates they should receive. This allows Nexo to provide additional trust and transparency to their large user base.”^[6]

Legal Issues and Investigations

Bulgarian Raid and Allegations

In January, the Bulgarian Prosecutor’s Office conducted a raid on Nexo’s offices in Bulgaria, citing the need to address alleged illegal activities. Authorities stated that a client of the platform was classified as an organizer of terrorist activity. The investigation involved 300 personnel from various government departments. Nexo responded by emphasizing its compliance measures and criticized what it viewed as aggressive regulatory actions.

Asset Under Management and Competitors

Nexo’s assets under management decreased from $15 billion in mid-2021 to $2.4 billion. Amidst the cryptocurrency market downturn, competitors like BlockFi and Celsius filed for bankruptcy. Nexo’s attempted acquisition of Singapore-based competitor Vauld was unsuccessful as Vauld terminated negotiations.

New York Attorney General Lawsuit

In September, the New York Attorney General filed a lawsuit against Nexo, alleging that its exchange and lending products required securities and commodities broker-dealer licenses, which it did not have. This added to Nexo’s legal challenges.

Prosecutor’s Office Halts Criminal Proceedings

In December, the Bulgarian Prosecutor’s Office halted criminal proceedings against Kosta Kantchev, Antoni Trenchev, Trayan Nikolov, and Kalin Metodiev, citing a lack of evidence for money laundering, tax crimes, or computer fraud. The investigation indicated that Nexo’s activities were likely managed outside Bulgaria, highlighting the legal ambiguities surrounding cryptocurrency regulation in the country.

Settlement with U.S. Regulators

Following the January raid, Nexo agreed to a $45 million settlement with the U.S. Securities and Exchange Commission and the North American Securities Administrators Association for failing to register the offer and sale of its Earn Interest Product. The platform ceased offering this product in April and announced plans to wind down operations in the U.S. due to regulatory uncertainties.

Bloomberg Report on Charges and Investigation

Bulgarian prosecutors charged four individuals connected to Nexo, including Kosta Kantchev, with forming an organized crime group related to money laundering, unlicensed banking activities, tax, and computer crimes. Authorities seized money, computers, and crypto assets during the investigation. Nexo co-founder Antoni Trenchev asserted that Nexo adheres to high standards of KYC and AML practices.

Impact on Nexo’s Operations

The raid resulted in nearly $45 million in net token outflows from Nexo within 24 hours. Despite these challenges, Nexo maintained operational systems and continued to serve its global customer base. The company’s legal and regulatory hurdles highlight the complexities of the cryptocurrency industry.

Nexo Sues Bulgaria for Over $3 Billion

Nexo AG and its subsidiaries filed a $3 billion arbitration claim against the Republic of Bulgaria. The claim, submitted at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington, DC, seeks damages for what Nexo describes as wrongful and politically motivated actions by Bulgarian authorities. Represented by the U.S. law firm Pillsbury Winthrop Shaw Pittman LLP, Nexo argues that the investigations caused significant financial and reputational harm.
Following the exoneration of Nexo’s executives by the Sofia City Prosecutor’s Office in December, Nexo co-founder Antoni Trenchev highlighted the impact of the January raid on the company’s operations. He noted the loss of business opportunities, including a funding round and an initial public offering on a major U.S. stock exchange valued between $8 billion and $12 billion. Additionally, Nexo had to abandon a strategic partnership with a major European football club.
Trenchev emphasized that despite the raid’s impact, Nexo continued its operations but faced slowed growth and missed opportunities. The arbitration claim aims to secure financial compensation and deter future unwarranted actions against blockchain enterprises. ^[7][8][9]