Nexo hit by ‘flood of withdrawals’ after raid on office in connection with money laundering investigation


Funds are pouring out of cryptocurrency lender Nexo, according to blockchain analytics firms following news that prosecutors in Bulgaria are investigating the company for fraud.

Nexo is a British digital asset platform that lends money from customers and uses the proceeds to pay interest. (Disclosure: Nexo is one of them Decrypts 22 investors.)

Earlier today, the company said it cooperated with the relevant authorities and regulators after news broke that Bulgarian prosecutors raided Sofia’s offices as part of a financial crimes investigation.

“There are authorities in one of Nexo’s offices in Bulgaria, which, as you know, is the most corrupt country in the EU,” said Nexo co-founder Antoni Trenchev. Decrypt via email earlier today. “They ask AML and tax related questions about a Bulgarian entity of the group that is not customer oriented, but only has back office functions: payroll, customer support and compliance.”

According to blockchain analysts, funds are now pouring out of the platform. Blockchain intelligence firm Arkham tweeted that hundreds of thousands of dollars had poured out of the platform within 24 hours. However, Nexo says the outflow is not abnormal. “We are not recording any abnormal activity related to withdrawals. It’s all normal,” a Nexo representative told me Decrypt.

Cielo Finance, which also tracks on-chain data Posted evidence on Twitter that large transactions of over $100,000 worth of stablecoins were withdrawn.

Cielo then confirmed Decrypt that it had “noted a deluge of client stablecoin withdrawals as well as the Nexo treasury wallet moving around WETH (Wrapped Ethereum), BNB (Binance Coin) and stables on Polygon and BNB chain.”

Last month, Nexo said it would phase out US products and services over the coming months because of a “dead end” with regulators.

The platform is not the only cryptocurrency lender affected by withdrawals. Celsius, one of the largest platforms in the lending space, collapsed spectacularly after pausing shooting due to “extreme market conditions” in June. The company then went bankrupt and now the New York Attorney General is bankrupt to sue ex-Celsius boss Alex Mashinsky for defrauding investors.

While BlockFi, another lender, also halted withdrawals in November. It went bankrupt soon after.

Exchanges have also been experiencing a wave of withdrawals lately, with tens of millions of dollars worth of crypto leaving Singapore-based Huobi last week. Majority shareholder and crypto tycoon Justin Sun hurried to bring liquidity back on the platform.

And in December, customers pulled out over $3.6 billion in one week from the world’s largest crypto exchange, Binance.

Trust in crypto platforms has been shaken by the collapse of the once-gigantic FTX — a digital asset exchange that exploded in November — and the failure of blockchain project Terra.

FTX was allegedly criminally mismanaged and mingled client funds so it could make risky bets through its sister company, Alameda Research. Disgraced CEO Sam Bankman-Fried (who founded Alameda Research) has pleaded eight criminal charges.

The collapse of FTX and Terra has led to infection– when a financial crisis spreads to other companies – in the digital asset market, and the effects of that contagion continue to be felt across the industry.

Editor’s Note: This article has been updated with comments from Nexo after publication.

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