Nexo Pursues $3B in Damages from Bulgaria after Abandoned Investigation

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Swiss-based cryptocurrency lender Nexo AG, a subsidiary of Nexo Capital in the Cayman Islands, is embroiled in a legal battle with Bulgaria, seeking $3 billion in damages.

The claim stems from the fallout of an abandoned criminal investigation initiated in January 2023, with Nexo contending that the inquiry has significantly harmed its reputation and shareholder value. The Bulgarian Prosecutor’s Office officially ended the investigation in December as there was no proof of illegal activity against the platform and its affiliates.

The company alleges that the investigation had detrimental effects on its plans for a U.S. stock market debut and a soccer sponsorship deal.

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Impact on Reputation and Shareholder Value

Nexo’s legal filing with the International Centre for Settlement of Investment Disputes (ICSID) highlights the adverse impact of the investigation on its reputation and shareholder value.

The company argues that the accusations, which included offenses such as participating in an organized crime group, money laundering, tax fraud, and computer fraud against Nexo’s co-founder Antoni Trenchev and others, were unfounded.

The case which was dropped last month due to a lack of evidence and the absence of a legal framework for crypto asset services in Bulgaria has intensified Nexo’s pursuit of damages.

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The $3 billion claim reflects the extent to which Nexo believes its business suffered as a result of the investigation. Nexo was forced to close down its operations in the United States at that time due to a conflict with the local authorities.

Political Influence and Legal Framework Challenges

Nexo, in its legal filing, contends that the investigation was politically influenced and refutes any wrongdoing on its part.

The absence of a legal framework for crypto asset services in Bulgaria further complicates the situation, prompting Nexo to emphasize the need for a fair and transparent evaluation of its case.

The company’s allegations of political influence add a layer of complexity to the dispute, raising questions about the circumstances surrounding the initiation and subsequent abandonment of the investigation.

Arbitration Proceedings and Response from Bulgarian Authorities

With the case now under the purview of the ICSID, the arbitration proceedings are expected to be a focal point in the legal battle.

Bulgaria’s Finance Ministry has acknowledged the ICSID’s arbitration request, signaling a commitment to a thorough review by a specialized inter-departmental committee before proposing the next steps. The prosecutor’s office, also implicated in the case, has yet to provide a statement.

The unfolding legal battle between Nexo and Bulgarian authorities underscores the challenges inherent in navigating the intersection of cryptocurrency services, legal frameworks, and potential political influences.

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