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LONDON – Cryptocurrency lender Nexo is seeking $3 billion in damages from Bulgaria over an aborted criminal investigation that the company alleges scuppered its plans for a U.S. stock market listing and a soccer sponsorship deal, legal filings seen by Reuters show.

Nexo AG, a Swiss unit of Cayman Islands-based Nexo Capital, alleges the investigation tarnished its reputation and destroyed shareholder value, according to a document filed with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).

The Washington-based ICSID, an international arbitration institution that handles disputes between international investors and states, registered the case on Jan. 18, its website showed. An ICSID spokesperson could not confirm the level of damages sought or other details.

Bulgaria’s finance ministry said it had received a request for arbitration from the ICSID, which would be reviewed by a specialised inter-departmental committee that would then propose next steps.

“This or any other communications… shall not be considered in any way an admission as to the substance of any claims or as an acceptance of any arbitral jurisdiction,” it added.

The prosecutor’s office, also a respondent in the case, did not respond to requests for comment.

Bulgarian prosecutors in Jan. 2023 launched an investigation into Nexo AG, raiding offices in Sofia and charging its founders with offences that included participating in an organised crime group to launder money and commit tax and computer fraud.

But they dropped the case last month, saying there was no evidence of criminal activity. Prosecutors said there was no legal framework for crypto asset services in Bulgaria.

Nexo, co-founded by former Bulgarian lawmaker Antoni Trenchev, had denied wrongdoing and alleges the investigation was politically motivated – an allegation previously denied by prosecutors, local news agency BTA has reported.

U.S. regulators in particular have been cracking down on alleged illicit activity at top crypto firms, but it is unusual for a crypto firm to take on a country over compensation for a investigation that was dropped.

ICSID has previously ordered various countries, including Pakistan, Ecuador and Venezuela, to pay out billions in damages to companies.

Reuters was unable to verify Nexo’s alleged damages. In an interview with Reuters earlier this month, Trenchev declined to publicly name the banks he said had been instructed for any listing or which European soccer club ended sponsorship talks.

Crypto lenders act like banks for the crypto world, offering customers interest on cryptocurrencies they deposit with the platform.

Nexo, founded in 2018, phased out its U.S. products and services last year and agreed to pay $45 million to settle charges from the U.S. Securities and Exchange Commission and state regulators that it failed to register its crypto asset lending product.
(Reporting by Elizabeth Howcroft and Kirstin Ridley Editing by Tommy Reggiori Wilkes and Louise Heavens)

  • Published On Jan 24, 2024 at 08:20 PM IST

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