Cryptocurrency lender Nexo said on January 24 it has filed an arbitration claim against Bulgaria worth over $3bn for damages caused by charges filed against the company, but later dismissed by a court due to lack of evidence.

In January 2023, Bulgaria’s prosecution launched a probe into alleged financial violations by Nexo, raiding the company’s offices and claiming it was involved in a large-scale financial fraud scheme. Prosecutors said the accusations included money laundering, tax crimes, unlicensed bank operations and computer fraud. Nexo said the charges were politically motivated, and extremely damaging to its business. 

Subsequently, the prosecution, at the time headed by Ivan Geshev, charged the company’s managers.

In December, the Sofia City Prosecutor’s Office dropped all charges, saying there was no evidence of any wrongdoing by the company or its management.

“Nexo AG and its subsidiaries have filed an over $3bn ICSID arbitration claim against the Republic of Bulgaria for damages and lost opportunities caused by the country’s wrongful and politically motivated actions against the company and its executives, involving unjustified and oppressive criminal investigations, subsequently dismissed for lack of merit,” the company said in a press release on January 24.

It will be represented by the US law firm Pillsbury Winthrop Shaw Pittman LLP, and the claim is submitted at the Secretariat of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington, DC.

“As a direct result of the politically motivated attack by the Bulgarian Prosecutor General's Office in January 2023, Nexo’s brand and reputation were damaged, lucrative business opportunities were lost, Nexo AG’s investments in Bulgaria were harmed,” the company noted.

It added that several of its planned business activities have been impacted by the allegations and had to be abandoned, including a plan for an IPO on a major US bourse with an indicative valuation between $8bn and $12bn.

“Nexo was days away from signing a multi-year strategic alliance with a major European football club, giving it exposure to its 330,000,000+ supporters across the globe. This partnership would have made Nexo the club’s official digital wallet and main partner. The roll-out of an innovative club-branded payment card was in the works – a game changer for both Nexo and the blockchain industry, as it would have offered an instant first-time gateway for millions of users to the rapidly expanding digital asset class,” the company also noted.

The company said its reputation and brand have been tarnished, resulting in a “plethora of missed opportunities and lost revenue”, and destruction of company value.

“Despite the unjustified attacks by the Bulgarian authorities in January 2023 taking a significant toll on the entire Nexo group, we were able to continue business operations,” said Antoni Trenchev, co-founder of Nexo.

However, he added that the company’s growth path has been slowed down and opportunities lost or significantly delayed.

Nexo, founded and managed by two Bulgarians – Kosta Kunchev and Antoni Trenchev – in 2017, accepts deposits in cryptocurrencies on which it pays interest to clients. It also provides loans using cryptocurrencies as collateral.

Gbolally, Nexo operates through companies registered in the UK, Switzerland, the US and offshore destinations. In Bulgaria, Nexo owns NDS, a company with around 600 employees.

In August 2022, the state of New York filed a lawsuit against the company over alleged illegal operations and fraud. Seven more US states have also undertaken legal actions against the company, ordering Nexo to stop offering its deposit products on their territory.