Cryptocurrency lender Nexo has filed an arbitration claim against the Republic of Bulgaria, seeking a substantial $3 billion in damages. The move comes after an aborted criminal investigation that Nexo alleges adversely impacted its reputation and thwarted critical business endeavors, including plans for a U.S. stock market listing and a soccer sponsorship deal, Reuters said in a report.
Legal documents obtained by the news agency reveal that Nexo AG, a Swiss unit of Nexo Capital based in the Cayman Islands, contends that the investigation conducted by Bulgarian authorities tarnished the company’s image and resulted in a significant decline in shareholder value. The allegations have been formally submitted to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), as disclosed in a document filed on January 18.
The ICSID, a Washington-based international arbitration institution specializing in disputes between international investors and states, has registered the case. However, details regarding the specific amount of damages sought or other case particulars have not been confirmed by an ICSID spokesperson.
Bulgaria’s finance ministry acknowledged receiving an arbitration request from the ICSID, indicating that a specialized inter-departmental committee would review the matter and propose subsequent actions. The ministry emphasized that any communication should not be construed as an admission of the substance of the claims or an acceptance of arbitral jurisdiction.
The Bulgarian prosecutor’s office, also named as a respondent in the case, has not responded to requests for comment.
The investigation in question was initiated by Bulgarian prosecutors in January 2023 against Nexo AG, leading to office raids in Sofia and charges against the company’s founders for alleged participation in an organized crime group involved in money laundering, tax fraud, and computer fraud. However, the case was dropped last month, with prosecutors citing a lack of evidence and the absence of a legal framework for crypto asset services in Bulgaria.
Nexo, co-founded by former Bulgarian lawmaker Antoni Trenchev, vehemently denies any wrongdoing and asserts that the investigation was politically motivated—an assertion previously refuted by local prosecutors.
This move by Nexo to seek compensation through arbitration against a country over a dropped investigation is unusual in the crypto industry. Regulatory authorities in the United States have been intensifying scrutiny on crypto firms, but cases involving countries seeking damages for dropped investigations are rare.
Nexo, established in 2018, phased out its U.S. products and services last year, settling charges with the U.S. Securities and Exchange Commission and state regulators by agreeing to pay $45 million for failing to register its crypto asset lending product.
In a recent interview with Reuters, Trenchev refrained from publicly disclosing the banks involved in any potential listing or the European soccer club with which sponsorship talks were terminated. The alleged damages claimed by Nexo remain unverified by Reuters.
