The crypto lending industry suffers another major blow. Nexo, one of the last remaining lending platforms, has seen more than $200 million worth of withdrawals following a raid by Bulgarian authorities.
The raid by the Bulgarian authorities is part of a investigation regarding alleged illegal activities by Nexo. In response, regarding 10% of the platform’s assets have been drained from users, as Nexo’s auditor Armanino reports on its website in real time confirmed.
Nexo: the next Celsius/BlockFi?
In a statement, Nexo called Bulgaria “the most corrupt country in the EU.” According to the lender, AML and tax investigations are being conducted into a Bulgarian entity of the group that does not deal with customers but only performs back-office functions – Payroll, customer care, compliance. Despite the raid, Nexo co-founder Antoni Trenchev stated that “all systems are up and everything is being processed in real-time as usual.” He also added that activity is orders of magnitude lower than following Celsius and following FTX.
The situation at Nexo is being closely watched by the crypto lending industry. Mainly because it raises concerns regarding the security of funds on these platforms. Since the crypto market is very volatile, any negative news or event can cause panic among investors and lead to large withdrawals. The raid by Bulgarian authorities and subsequent withdrawals at Nexo are a reminder of the risks in the crypto lending industry and the need for proper regulation and oversight.
At this point in time, it is unclear how the investigations by the Bulgarian authorities will end and how they will affect Nexo and its customers. Still, it serves as a warning to other crypto lending platforms to ensure they are taking appropriate measures to protect client funds and comply with regulatory requirements.
Crypto lenders under fire
Nexo has also recently come under fire in the United States devices. In September, eight states — California, Kentucky, Maryland, New York, Oklahoma, South Carolina, Washington and Vermont — filed cease and desist letters once morest the company. This move by state regulators was a major blow to Nexo, whose popularity has grown in recent years. In addition to the cease and desist orders, Nexo is also facing a lawsuit in New York confronted. The lawsuit, filed by the state, alleges the company fails to register as a securities and commodities broker or dealer and lies to investors regarding its registration status.
This isn’t the first time Nexo has been on trial in the United States. In the past, the company has been the subject of various regulatory actions, including fines and penalties. However, these recent developments represent a significant escalation of the regulatory pressures the company is facing. Nexo has not yet commented on the situation. However, the company is expected to take steps to address the allegations and concerns raised by regulators. The litigation is likely to have a significant impact on the future of the company and the crypto lending industry as a whole.
