Nexo is reportedly still planning on finding a suitable agreement in negotiations to take over crypto lender Vauld. According to a report from Bloomberg, talks between Nexo and Vauld are currently at an impasse as Vauld’s January 20 deadline to present a restructuring plan to creditors approaches. Nexo began negotiations with Vauld in July 2022 amid […]
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Switzerland-based crypto lender Nexo is announcing plans to cease its business operations in the United States. The crypto lender says that the decision is influenced by the regulatory and policy landscape in the United States. Withdrawals will continue to be processed in “real-time,” according to Nexo. “Today we are announcing the regrettable but necessary decision […]
The post Crypto Lender Nexo To Leave United States, Citing Lack of Regulatory Clarity appeared first on The Daily Hodl.
When it was first discovered that FTX might be insolvent, a large slew of crypto exchange executives said that they aimed to provide proof-of-reserves audits. While exchanges like Binance and Crypto.com have provided wallet addresses tied to company wallets, blockchain analytics firm Nansen has detailed the company is in the midst of creating a display […]
The firm withdrew its remaining balance from FTX at the 11th hour and topped weekly fund outflows from the troubled exchange.
According to a Nov. 8 tweet, crypto lender Nexo currently has net zero exposure to the ongoing crisis embroiling cryptocurrency exchange FTX and crypto trading firm Alameda Research. Nexo also explained that it withdrew its entire balance of funds from FTX within “the past few days.”
Alex Svanevik, CEO of blockchain analytics platform Nansen, confirmed the story, providing data showing that Nexo withdrew over $219 million from FTX between Nov. 1 and Nov. 8. This also ranks Nexo as the top entity for funds outflow in the past week.
The firm appears to have dodged a major bullet, as on Nov. 8, FTX announced that it would halt all non-fiat consumer withdrawals. Continuing with its assessment of the situation, Nexo said that it had a small loan to Alameda Research representing less than 0.5% of its assets. The loan was fully collateralized by digital assets, which Nexo said were sold on Nov. 6. According to the firm, the trade resulted in “100% principal recovery and $0 losses for the company.”
.@Nexo has $0 net exposure to FTX/Alameda.
— Nexo (@Nexo) November 8, 2022
As a conservative institution with stringent risk controls @Nexo has safeguarded *all* funds by withdrawing its entire balances from the exchange over the past few days, as evidenced by on-chain data:https://t.co/py8fzBDKbP
1/
Nexo has thus far sidestepped major industrywide risk events this year, including the collapse of Terra, hedge fund Three Arrows Capital and crypto lender Celsius. According to a real-time audit of the firm’s custodied assets, Nexo currently has more than $3.4 billion in consumer liabilities, with a collateralization ratio of more than 100%, making them fully backed by Nexo’s assets. The numbers are attested by United States accounting firm Armanino LLP, which is an auditor certified by the Public Company Accounting Oversight Board.
On Nov. 9, 2022, a day after the news broke regarding Binance planning to purchase the exchange FTX, the crypto economy dropped 11.17% in 24 hours. The crypto economy has slid under $900 billion for the first time since January 2021. The Binance and FTX news has come as a shock to a lot of […]
Co-founder Kalin Metodiev stated that comparisons between Celsius, Voyager and Nexo are “very far from reality” and that the firm is focused on building in a sustainable way.
Bankruptcy or insolvency is not in “Nexo’s reality” according to the crypto lending platform’s co-founder and managing partner, Kalin Metodiev.
In an Ask Me Anything (AMA) video posted via YouTube on Oct. 4, founders and managing partners Metodiev and Antoni Trenchev addressed community questions and recent FUD-related rumors that Nexo could soon face insolvency issues.
Responding to a question about the insolvency/bankruptcy rumors and whether Nexo will be the “next Celsius and Voyager,” Metodiev explicitly stated that:
“Insolvency, bankruptcy are nowhere in Nexo’s reality, and we believe, we hope, we aspire, [and] we[‘re] work[ing] very hard to deliver a very strong and sustainable future for our users.”
“Finding resemblances with these two names [Celsius and Voyager] or other names in the space, is very far from reality and I think this is very easily verifiable,” he added.
Adding to Metodiev’s comments, Trenchev noted: “that I didn’t want to mention [any] names but I'm going to mention a few names; you know, no exposure to the Terra (LUNA) debacle, absolutely no lending to Three Arrows Capital.”
“In the two names that were mentioned in the question, in the bankruptcy filings you can see the creditors list, Nexo is not on that,” he said.
The rumors appear to have originated in part, from a claim in a Sept. 26 cease and desist order from the Kentucky Department of Financial Institutions that Nexo’s “liabilities would exceed its assets” if its Nexo (NEXO) token holdings were excluded from the equation. This is just one of several cease and desist orders filed against Nexo.
Market analysts such as Dirty Bubble Media author Mike Burgersburg previously alleged that Nexo is facing insolvency risks because it holds the vast majority of NEXO’s token supply on its platform, similar to Celsius which owned more than 50% of its native token, CEL.
In line with such thinking, a sharp decline in the price of NEXO could significantly impact the company, he alleged.
However, a Nexo spokesperson promptly denied the allegations to Cointelegraph, stating that the data they provided to Kentucky regulators was for one of the Nexo Group’s entities, and that “NEXO tokens represent less than 10% of the company’s total assets.”
In the AMA, the Nexo founders also addressed a question relating to the firm’s recent attestation, which indicated that Nexo’s $3.7 billion worth of customer liabilities are 100% collateralized but doesn’t provide any further details than that.
Related: Nexo ‘surprised’ by state regulators’ actions, says co-founder
Asked whether the firm plans to “include a breakdown of assets within the attestation rather than just a total dollar figure?” Metodiev outlined that Nexo will provide greater transparency, but didn’t outline what that will entail as he suggested the company also needs to balance the need for privacy to stave off competition.
“The more transparency we can provide that will be helpful to our community, to our users, to decision makers for investment purposes. We would continue increasing this transparency, but making sure that this transparency, first of all, doesn't diminish our competitive edge.”
“I think you know that while we commit and will continue increasing the transparency, it needs to be done with the proper degree of duty and responsibility to make sure that this transparency is constructive and beneficial for decision making purposes,” he added.
Blockchain analytics firm Santiment says that crypto lender Nexo has pulled a huge portion of Wrapped Bitcoin (WBTC) off of decentralized finance (DeFi) platform MakerDAO following the firm’s legal troubles with multiple state regulators. Santiment says that Nexo’s big withdrawal from MakerDAO has taken nearly half of all the WBTC off of the platform and […]
The post Wrapped Bitcoin Locked on MakerDAO Falls to 2022 Low After Nexo Withdraws Massive Amount of WBTC: Santiment appeared first on The Daily Hodl.
Analysts fear NEXO price could come under pressure if regulatory action in the United States begins to intensify.
Crypto lending firm Nexo is at risk of losing half of the valuation of its native token by the end of 2022 as doubts about its potential insolvency grow in the market.
For the unversed: Eight U.S. states filed a cease-and-desist order against Nexo on Sep. 26, alleging that the firm offers unregistered securities to investors without alerting them about the risks of the financial products.
In particular, regulators in Kentucky accused Nexo of being insolvent, noting that without its namesake native token, NEXO, the firm’s “liabilities would exceed its assets.” As of July 31, Nexo had 959,089,286 NEXO in its reserves — 95.9% of all tokens in existence.
“This is a big, big, big problem because a very basic market analysis demonstrates that Nexo would be unable to monetize a significant chunk of these tokens,” noted Mike Burgersburg, an independent market analyst and author of the Dirty Bubble Media Substack, adding:
“Given that fact, the true value of the $NEXO tokens on Nexo’s balance sheet is likely close to $0.”
NEW: “IS NEXO NEXTO?”
— dirtybubble.usd (@MikeBurgersburg) September 28, 2022
According to state regulators, Nexo is insolvent without counting $NEXO tokens on their balance sheet.
This is the same situation Celsius Network was in… and basic market analysis suggests real value of their $NEXO is ~$0 https://t.co/txt1kOSydH
Burgersburg also alleged that Nexo faces insolvency risks because it holds the vast majority of NEXO’s token supply on its platform. He drew comparisons to Celsius Network, a now-defunct crypto lending firm that owned more than 50% of its native token, CEL.
Celsius ended up holding over 90% of the total CEL tokens in circulation after attracting deposits and collateral from customers. This made CEL extremely illiquid and, thus, volatile. In other words, CEL became a deeply imperfect asset for patching Celsius’ troubling balance sheets.
“NEXO token is even more illiquid than the bankrupt Celsius Network’s CEL token,” warned Burgersburg, noting that the token’s average daily trading volume comes to less than 1% of its market capitalization.
However, a Nexo spokesperson denied the allegations, clarifying that the data they provided to Kentucky regulators was for one of the Nexo Group’s entities.
“We can confirm that on a consolidated basis, NEXO tokens represent less than 10% of the company’s total assets,” they told Cointelegraph, adding:
“That, in return, exceeds the company liabilities even when excluding the company’s net position in NEXO tokens.”
As to why Nexo holds more than 90% of the NEXO supply, the firm’s spokesperson cited the token’s economics and utility, saying that they create natural incentives for clients to keep their tokens on the platform.
“In addition to earning higher interest rates on their digital asset balances by holding NEXO tokens on the Nexo platform, clients can use NEXO tokens as collateral, earn interest on them and exchange them directly on the Nexo platform,” they explained, adding:
“The same is true for the tokenomics of companies with similar value propositions such as FTT, BNB and CRO, held predominantly on FTX, Binance and Crypto.com, respectively.”
The fear, uncertainty and doubt surrounding the rumors of market volatility or stringent regulation against crypto lending platforms could create negative investment sentiments toward NEXO. Unfortunately, the token’s technical setup suggests the same.
Related: Nexo acquires stake in US chartered bank
Notably, NEXO’s price has been forming what appears to be an ascending triangle on its longer-timeframe charts since June 12. Ascending triangles are considered bearish continuation patterns in a downtrend, which makes NEXO susceptible to extreme price declines.
By the rule of technical analysis, an ascending triangle resolves after the price breaks below its lower trendline and continues falling in the same direction until it reaches the level that is at length equal to the triangle’s maximum height.
This setup is illustrated in the chart below.
In the event that the pattern confirms, the price of NEXO could fall toward $0.47, down about 50% from its current price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Kalin Metodiev emphasized that Nexo has been navigating through conversations with regulators for the past couple of years to ensure compliance, and was surprised that this news was “thrown out there in public.”
Kalin Metodiev, the co-founder and managing partner of crypto lender Nexo stated his firm was “surprised” by the way in which eight state regulators publicly took action against it for securities violations.
Earlier this week the California Department of Financial Protection & Innovation (DFPI) filed a desist and refrain order against Nexo’s Earn Interest Product, claiming the company was offering a security product that had not been cleared by the government for sale in the form of an investment contract.
The DFPI also stated that it was joining regulators from seven other states in taking action against the company, including Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont.
Speaking with Cointelegraph at Token2049, Metodiev explained that Nexo was caught off guard with the latest regulatory push back, as it has been “trying to be responsible” by engaging in direct conversations with the regulators such as the Securities and Exchange Commision (SEC) for quite some time.
“We were a little surprised by this news being thrown out there in public, you know, because this isn't a process that just started this week,” he said, adding that:
“We have worked with our legal advisors in the U.S. that we have used for the last couple of years to navigate us specifically through these waters in these conversations.”
Metodiev said Nexo also communicated to the SEC earlier this year that it was “voluntarily” discontinuing services for new U.S. customers, suggesting the firm was working in good faith and aiming to be compliant with local regulations.
The product has not been available to new users in the United States since Feb. 19, and existing U.S. account holders were unable to make new deposits into their accounts.
“The event that made us make the decision was actually the SEC ruling against BlockFi in February. The moment we saw that we established contact with the SEC, and we communicated that we're voluntarily discontinuing, taking money from U.S. customers. And we haven't been working with new customers for our interest generating product.”
Ultimately this hasn’t put Nexo off over providing services in the U.S. however, as the firm will continue to remain in conversations with regulators over its crypto offerings.
Metodiev also highlighted that the company is looking at U.S. expansion through other avenues, pointing to Nexo acquiring a stake in Hulett Bancorp this week, a holding company that owns the federally chartered Summit National Bank.
Nexo has also been out on the look out for crypto company acquisitions, with Metodiev noting that the firm has had discussions with a lot of liquidity troubled firms in the bear market, even the likes of Voyager Digital and Celsius.
Related: FTX reportedly considers bailing out Celsius via asset bid
While he stated discussions had been going well with various firms, he didn’t provide any concrete details on any deals that could be in the works. Metodiev suggested it had been priced out of a Voyager deal, as its $1.4 billion asset valuation that FTX snapped it up for, became too high for Nexo.
“If the opportunity becomes too rich for us, as I mentioned, our risk management, kicks in and we say, you know, we're not sure that we can break even on this. We want to help the people and the platform, but at the same time, it needs to be a normal business assessment for us,” he said.
California’s Department of Financial Protection and Innovation (DFPI) says it issued desist and refrain orders for 11 entities that it accuses of engaging in fraudulent investment schemes involving crypto assets. In a new statement, the DFPI says that the entities are operating Ponzi and pyramid schemes, and violate securities laws. Included in the 11 listed […]
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