Nexo ‘Vehemently Denies’ Allegations of Fraud Following Arrests in Bulgaria

Crypto lender Nexo “vehemently denies” allegations leveled at it by the Bulgarian Prosecutor’s Office following the arrest of four people on Friday as part of an investigation into the company.

A spokesperson, speaking on behalf of Nexo’s management, told Decrypt they could not confirm whether the people arrested were company employees.

The Bulgarian Prosecutor’s Office said during a press conference that the Bulgarian nationals who’ve been arrested are suspected of money laundering, tax crimes, computer fraud, and unlicensed banking, according to English-language Bulgarian news outlet Novinite.

Nexo, a London-based digital asset platform, loans out client funds and uses the proceeds to pay interest. It’s one of the last crypto lenders standing, as both of its main competitors Celsius and BlockFi, filed for bankruptcy last year.

At the time, Nexo said it only makes overcollateralized loans. That means it tends to pay lower yields than the ones that BlockFi and Celsius used to offer. In June, its website said that it exposed clients to “basically no risk.” That language has since been removed and replaced with a pledge to “never lend without collateral.” (Disclosure: Nexo is one of Decrypt’s 22 investors.)

The company has said repeatedly that the investigation and a raid of its office yesterday were politically motivated.

“We witnessed a very confusing press conference by the Bulgarian Prosecutor’s Office, which as is publicly known, [has] a terrible reputation and conviction rate and has been routinely used by nefarious characters as means of business raiding,” the Nexo spokesperson said Friday morning. “It is also abundantly clear that the prosecutor’s office has no understanding of blockchain technology or financial institutions and markets in general.”

Yesterday the Bulgarian Prosecutor’s Office announced their widespread investigation into Nexo, which has an office in Sofia. Although it’s still unclear how the investigation will play out, users seemed to be in a rush to get their funds off the Nexo platform following an office raid.

An archived version of Nexo’s real-time attestation tool shows that Nexo had 133,263 BTC in customer liabilities, worth roughly $2.4 billion, on Thursday morning. By Friday morning, that had dropped to 124,939 BTC, a change of about $68 million in the past day.

Cielo Finance, an on-chain data tracker, shared a screenshot on Twitter showing hundreds of thousands of dollars worth of USD Coin (USDC), Binance USD (BUSD) and Ethereum leaving the platform in large transactions.

“I can confirm that all systems are up and running, and everything is being processed in real-time as always and the volume currently is orders of magnitude smaller than post-Celsius and post-FTX,” the Nexo spokesperson said about the withdrawals.