Nexo Files Lawsuit Against Cayman Islands: Details

• Nexo has has filed a lawsuit against the Cayman Islands Monetary Authority (CIMA) over its registration as VASP in the region.
• The crypto lender stated that it was “suitable” to offer crypto services to citizens of the island nation.
• CIMA claims that Nexo had not disclosed “certain legal and regulatory matters as noted in the news media.”
• Recently, the firm were raided by Bulgarian authorities and four people were indicted on charges of money laundering.

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The chaos in the crypto market continues to prevail as the industry is trying to move ahead after the collapse of crypto exchange FTX. Interestingly, renowned crypto lender Nexo, which is facing troubles of its own, has filed a lawsuit against the Cayman Islands Monetary Authority (CIMA) the same week that Bulgarian authorities raided Nexo’s offices and indicted four people on charges of money laundering.

According to a document from January 12, the crypto lending company has sued CIMA for denying its registration as a virtual asset service provider (VASP) in the Cayman Islands. The crypto lender requested the court to reverse the financial regulator’s decision and argued that it was “suitable” to offer crypto services to citizens of the island nation.

In accordance with court documents, Nexo submitted an application to CIMA in January 2021 with updated information at the regulator’s request. However, the regulator claimed that Nexo had not disclosed “certain legal and regulatory matters as noted in the news media” and therefore demanded clarification on the application last October. Notably, the monetary authority denied the application in December last year.

“The Authority breached its constitutional and statutory duty to provide comprehensible, satisfactory and sufficiently detailed reasons for its Refusal Decision,” the crypto lender alleges.

Interestingly, Sofia, Bulgaria-based Nexo has been under investigation for using offshore accounts to evade taxes and launder money since April 2021. The Bulgarian Financial Supervision Commission (BFSC) first started the investigation by partnering with law enforcement agencies in Bulgaria, the United Kingdom, and the United States.

All accusations of impropriety have been denied by Nexo, which has asserted that the company complies fully with all relevant laws and regulations.

Citing instances in UK courts, Nexo argued that CIMA had given “too much weight” to regulators’ plans to take enforcement action against the cryptocurrency lender. United States state-level agencies also issued cease-and-desist orders to Nexo in 2022, but Nexo claims in its lawsuit that this doesn’t indicate that the company acted improperly:

“[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 behavior.”

Interestingly, the co-founders of the crypto lender, Antoni Trenchev and Kalin Metodiev, confirmed that it is not insolvent, adding that the platform has no ties to or exposure to bankrupt crypto hedge fund 3AC or the Terra ecosystem.

Due to a lack of regulatory certainty, the lending company stated in December that it will gradually stop operating in the United States “over the coming months.” It is also crucial to note that the native token of the lending platform, NEXO, has dropped significantly over the past couple of months since its listing on the world’s biggest crypto exchange, Binance.

At the time of writing, the price of 1 NEXO is down 84% from the all-time high witnessed in the month of November last year and is priced at $0.7396, while the ATH was $4.63.

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