Nexo shutters US Earn product a month after settling with regulators

February 13, 2023 Coin Telegraph

The shutdown of Nexo’s earn product follows from a multi-million dollar settlement the firm paid last month with U.S. regulators.

Cryptocurrency lending firm Nexo Capital is set to terminate its yield-bearing Earn Interest Product for its customers in the United States roughly a month after it agreed to pay $45 million in penalties to U.S. regulators.

Nexo announced the termination in a Feb. 10 blog post saying the product would be stopped on Apr. 1. The program allowed users to earn daily compounding yields on certain cryptocurrencies by loaning them to Nexo.

An update for our U.S. clients.https://t.co/wRiDOPKEqg
— Nexo (@Nexo) February 11, 2023

Nexo pointed to its Jan. 19 settlements with the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) as the reason for the halt on offering Earn.

The SEC, NASAA and at least 17 state securities regulators investigated Nexo for failing to register the offer and sale of its Earn product.

Nexo paid a $22.5 million penalty and agreed with the SEC to cease offers of its Earn product to U.S. investors, an additional $22.5 million in fines were paid to settle charges by state regulators.

Nexo did not admit or deny the findings by the SEC but agreed to a cease-and-desist order prohibiting it from violating securities law provisions.

According to Nexo’s announcement, Earn users will continue to receive interest payments until Apr. 1. Those subscribed to a fixed-term product will have it unlocked on the termination date with Nexo urging users to “begin planning the withdrawal of your funds.”

Other Nexo services and products will not be affected according to the firm.

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Troubled crypto lender Vauld gets extended creditor protection

January 17, 2023 Coin Telegraph

Coin Telegraph

The company claims that the negotiations with potential crisis managers entered the “advanced stage.”

Embattled crypto lending platform Vauld was granted another period of creditor protection from a Singapore court. The company should come up with a revival plan before Feb. 28.

As reported by Bloomberg on Jan. 17, Vauld has been granted more than a month to close its negotiations with one of two digital-asset fund managers to take over the executive control of the tokens stuck on its platform. Apparently, the Singapore high court was satisfied by the company’s claim that the negotiations have entered to the “advanced stage.”

In July 2022, the platform halted withdrawals for its 800,000 customers, citing unfavorable market conditions and an unprecedented $200 million worth of withdrawals in under two weeks. In August 2022, it was already granted a three-month moratorium to develop a restructuring plan for the business and provide a better outcome for its creditors. Back then the judge denied the company’s request for a six-month protection period, citing concerns that a lengthier moratorium “won’t get adequate supervision and monitoring.”

From the beginning of the first moratorium, it became known that Nexo, a Swiss-headquartered crypto lender, intended to acquire Vauld with all its assets. However, after Nexo’s own office in Bulgaria was raided by police, Vauld denied any possibility of this deal.

That’s not the first time Singapore authorities have demonstrated their readiness to let troubled crypto companies fix their problems. Another major Singapore-based platform, Zipmex, was granted a three-month moratorium to sort out liquidity issues in August 2022.

However, the fate of crypto lending in the country remains unclear, with Singapore’s central bank proposing banning digital payment token service providers from offering “any credit facility” to consumers, including both fiat and cryptocurrencies.

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While the FTX saga continues to make headlines, last week brought a plethora of new troubles for crypto companies in the United States, Europe and Asia.

The United States Securities and Exchange Commission charged cryptocurrency lending firm Genesis Global Capital and crypto exchange Gemini with selling unregistered securities through Gemini’s “Earn” program.

The Commodity Futures Trading Commission started the process of getting a default judgment in its case against Ooki DAO after the decentralized autonomous organization missed the deadline to respond to the lawsuit. It also filed suit against digital artist Avraham Eisenberg and charged him with two counts of market manipulation in connection with an exploit of the decentralized finance platform, Mango Markets.

In South Korea, tax agents raided the Seoul headquarters of cryptocurrency exchange Bithumb, looking for evidence of possible tax evasion. This development comes after former Bitchumb chair Lee Jung-Hoon was acquitted of $70 million in fraud charges. In the Bulgarian capital of Sofia, the offices of crypto lending firm Nexo were raided by police. They targeted a large-scale money laundering scheme and violations of Russia’s international sanctions.

While the FTX saga continues to make headlines, last week brought a plethora of new troubles for crypto companies in the United States, Europe and Asia.

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There’s still a place for good news. Bankrupt crypto lender Voyager Digital has finally received initial court approval for its proposal to sell its assets to Binance.US for $1.02 billion. The approval comes amid a national security probe concerning Binance.US that Voyager seeks to speed up. The Voyager Official Committee of Unsecured Creditors — a body representing creditors with no security interests in Voyager — supported the transaction in its current form, noting the deal would result in greater recoveries for creditors than if Voyager liquidated its holdings itself.

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In September 2022, the Public Service Commission of New York authorized the conversion of the Fortistar North power plant into a crypto-mining site. Now it faces a lawsuit, with the Clean Air Coalition of Western New York and the Sierra Club claiming that the Fortistar plant only operated during periods of high demand for electricity, such as extreme weather conditions. However, as a crypto mining plant, the site would run 24 hours a day, generating up to 3,000% more greenhouse gas emissions.

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As the investigation into FTX continues, the crypto exchange’s former engineering chief, Nishad Singh, followed former FTX and Alameda Research executives Gary Wang and Caroline Ellison by reportedly meeting with federal prosecutors to cut a deal.

The former president of FTX US, Brett Harrison, has lashed out at Sam Bankman-Fried for manipulating and threatening colleagues who proposed solutions to reorganize FTX US’ management structure. Despite recalling Bankman-Fried to be a “sensitive and intellectually curious person” at first, Harrison said he saw “total insecurity and intransigence” in Bankman-Fried when confronted with conflict, particularly when Harrison suggested FTX US establish separate branches for its executive, developer and legal teams.

Meanwhile, FTX was approved to sell some of its assets to aid efforts to repay creditors. Judge John Dorsey has approved the sale of four key units of FTX, including the derivatives platform LedgerX, the stock-trading platform Embed and its regional arms, FTX Japan and FTX Europe.

Nexo sues Cayman Islands financial regulator over VASP license

January 16, 2023 Coin Telegraph

Cayman Islands

The crypto lender claimed that the Cayman Islands Monetary Authority had placed “too much weight” on regulators' enforcement actions in its decision to deny registration.

The same week that Bulgarian authorities were raiding Nexo’s offices and indicting four individuals for charges related to money laundering, the crypto lender filed suit in the Cayman Islands.

In a document dated Jan. 12, Nexo filed a lawsuit against the Cayman Islands Monetary Authority, or CIMA, for denying its registration as a virtual asset service provider (VASP) in the island nation. The crypto lender asked the court to overturn the financial regulator’s decision as it was “suitable” to provide crypto services to Cayman Islands residents.

According to court documents, Nexo applied to CIMA in January 2021, providing additional information at the request of the regulator. However, the monetary authority asked for clarification on the application in October 2022, citing “certain legal and regulatory matters as noted in the news media” which Nexo had not disclosed, and later rejected the application in December 2022.

“The Authority breached its constitutional and statutory duty to provide comprehensible, satisfactory and sufficiently detailed reasons for its Refusal Decision,” alleged Nexo.

Nexo claimed that CIMA had placed “too much weight” on regulators posing enforcement actions on the crypto lender, citing incidents in United Kingdom courts. State-level regulators in the United States also filed cease and desist orders against Nexo in 2022:

“[Nexo] had diligently cooperated with all US states and federal regulatory inquiries and has been proactive in maintaining dialogue with the respective regulators [...] There have been some regulatory ambiguities with respect to the laws and regulations applicable to digital assets in the US such that the fact of the regulatory enforcement itself does not connote any improper behaviour.”

The lending firm announced in December that it planned to gradually cease operations in the United States “over the coming months,” citing a lack of regulatory clarity.

Nexo investigation is not political, says Bulgarian prosecutors

January 15, 2023 Coin Telegraph

Bulgaria

A spokesperson for Bulgaria’s chief prosecutors denied claims that the investigation was prompted by the company's political donations.

Siika Mileva, a spokesperson for Bulgaria’s chief prosecutors, denied political motivations behind the probe against the crypto lending firm Nexo, according to local reports. The comments were made in response to claims that the investigation had a connection to the company's political donations.

Almost all cases where a prosecution launches an investigation that affects someone's financial interests result in attacks and accusations, Mileva said, adding that "it has become a national sport to attack the institutions."

On Jan. 12, a group of prosecutors, investigators and foreign agents searched the company’s offices in the Bulgarian capital city of Sofia. The operation targeted a large-scale money laundering scheme as well as violations of Russia's international sanctions

In less than 48 hours after Nexo’s offices were raided, four people were charged with money laundering, tax crimes, computer fraud, and unlicensed banking. Two individuals were released on bail worth nearly $550,000. The two others remain unfound in Bulgaria and have been declared internationally wanted persons. It’s unclear whether the individuals had a connection with the crypto firm.

According to Mileva, transactions carried out by Nexo amounted to $94 billion in a period of five years. An organized criminal group operating in several countries since the beginning of 2018 has been under investigation, noted the spokesperson.

On Twitter, Nexo complained about the law enforcement raid and said it was preparing a lawsuit against for damages caused by the abrupt police interruption. The company classified the authorities approach as “kick first, ask questions later”.

According to the company, investigators did not provide a search warrant for hours, while inspectors never identified themselves to Nexo employees.

We are always cooperating with the relevant authorities and regulators, and we are hopeful that we will have some exciting news in the weeks to come. 7/
— Nexo (@Nexo) January 12, 2023

Nexo operates an investment platform where users can stake and borrow against crypto. Although it has offices in Bulgaria, the firm does not provide services to the country's residents due to potential regulatory issues. The company was founded in 2018 and has offices in the United Kingdom, Bulgaria and Switzerland.

In December 2022, Nexo announced it would phase out its United States operations due to a lack of clear regulatory cooperation with U.S. authorities.

Bulgarian authorities charge four individuals following raid on Nexo office: Report

January 13, 2023 Coin Telegraph

Bulgaria

Following the Jan. 12 raid on its Sofia offices, Nexo described prosecutors’ actions as a “kick first, ask questions later” approach.

Less than 48 hours after a raid on cryptocurrency lender Nexo’s offices in the Bulgarian capital of Sofia, prosecutors have reportedly charged four people.

According to a Jan. 13 report by Bloomberg, authorities charged four Bulgarian nationals with forming an organized crime group, which may have included activities related to money laundering and unlicensed banking. The country’s National Police Service reportedly seized a number of assets as part of the investigation, including cryptocurrency, cash, and computers.

Following the Jan. 12 raid, Nexo described prosecutors’ actions as a “kick first, ask questions later” approach. The company reportedly planned to file a lawsuit seeking compensation for damages caused by police actions, alleging authorities did not show a search warrant or identify themselves to Nexo employees.

“We are always cooperating with the relevant authorities and regulators,” said the lending firm.

George Naydenov, a frontend developer at Nexo’s Sofia office, said on LinkedIn:

“I thank the Bulgarian Prosecutor's Office for trying, of course, in the most incompetent and pathetic way to take away the work of over 600 people in Nexo including me.”

It’s unclear which individuals and what role they may have held at Nexo were involved in the arrests. The lending firm has roughly 600 employees in Sofia.

Founded in 2018, Nexo operates an investment platform allowing users to stake and borrow against crypto. The company has offices in the United Kingdom, Bulgaria, and Switzerland, but reportedly does not offer its services to Bulgarian residents due to potential issues with the local government. In December, Nexo announced that it planned to phase out its services in the United States, citing the lack of a clear regulatory-compliant path forward.

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Voyager and Binance.US deal given the green light