Summary:
- The crypto lender’s office in Bulgaria was raided on suspicions of fraud, money laundering, and tax evasion.
- Local authorities also claimed to have evidence proving that a Nexo user financed terrorism.
- The company said they’re cooperating with law enforcement and assured users that the uncertain period “too shall pass”.
Nexo’s Bulgarian division was raided by local law enforcement on Thursday due to suspicions that the crypto lender facilitated fraud, money laundering, and tax evasion. According to the official report, Bulgarian police are investigating the company’s domestic entity that boasts operational functions including payroll and customer support.
In addition to fraud and tax evasion allegations, local authorities also believe a Nexo user financed terrorism by leveraging the cryptocurrency platform. The statement from Bulgaria’s prosecutor’s office said over 300 law enforcement agents are part of the investigation to “neutralize the criminal activity” at the giant crypto lender.
Evidence has been collected that a person who used the platform and transferred cryptocurrencies has been officially declared a terrorist financing person.
On Thursday, Nexo published a Twitter thread to inform users of the company’s cooperation with local authorities. The crypto lender noted that regulators have adopted a “kick first, ask questions later approach” toward digital asset companies in light of recent crashes and crackdowns in the crypto industry.
Regarding claims of terrorism financing, the lender highlighted that crypto is not suited for illicit purposes and can be tracked across immutable blockchain records.
Crypto is actually terrible for illicit purposes – using Chainalysis, for example, we know the history of the asset while it is being deposited and have a good understanding of the address to which it is withdrawn. This is more difficult with fiat and requires other techniques.
Nexo Solvency Draws Doubt After Vauld Rejects Buy-Out Deal
The crypto lender moved to acquire troubled crypto lender and rival entity Vauld. Vauld shut down withdrawal amid contagion from Terra’s crash after users pulled roughly $200 million from the platform. The crypto lender also staff count by 30% to redirect resources towards restructuring.
On December 26, 2022, Nexo submitted a final proposal to take over Vauld. However, Vauld’s creditors rejected the offer, claiming a lack of comprehensive due diligence and solvency assessment report. Concerns about Nexo’s financial health supposedly erupted following Vauld’s rejection.
The crypto lender currently under investigation by Bulgarian police also shuttered its U.S. business in December last year.