Nexo Sued for Blocking Withdrawals
Crypto lending is big business these days. With the market being more visible than ever before, many people are looking to lend and borrow cryptocurrency and take advantage of movements within the market.
At the same time, crypto lending can also be a very complicated business, as popular crypto lender Nexo is finding out. This comes as three investors have brought a case to a London High Court against the company claiming that it blocked them from withdrawing their funds and also pressured them into selling their crypto back to the exchange at an unfavourable price.
Nexo in Legal Drama
The parties at the centre of this suit are Jason and Owen Morton and their cousin Shane Morton who claim to have had millions of dollars on the exchange at one point. The problems began when the three started having concerns about the structure behind the company, the influence of its employees over its NEXO tokens, and its status with the UK’s Financial Conduct Authority (FCA).
The trio had brought these concerns to Nexo in late 2020 but were not satisfied with the response they received. As such, they began making moves to liquidate their $126 million holdings in the company by selling their Nexo tokens. These sales took place in small amounts so as to not affect the overall market price of the token.
This is when the exchange retaliated and, as per court documents, put a $150,000 per day withdrawal limit on their accounts. Then, on March 23, 2021, the exchange disabled the buttons on the entrepreneurs’ dashboards, stopping them from withdrawing anything. Furthermore, the entrepreneurs could not convert their NEXO tokens to any other cryptocurrency, leaving them in a precarious situation.
After speaking with their account manager with Nexo, they were told that their withdrawals were frozen to protect the market price of the token. Furthermore, they were offered a deal to sell their tokens at a 60% discount on the typical market price to regain access to their accounts’ features. They agreed to this and received $38,948,743 for their tokens.
However, the entrepreneurs have claimed that the tokens they were pressured into selling were worth $85.4 million at the time and that the deal was unfair. Now, they are suing the exchange.
Nexo’s Response
The exchange, on its part, has denied any wrongdoing and slammed the lawsuit as being opportunistic. Speaking to CoinDesk, lawyers for the exchange said that the sale happened over a year ago and that lawsuit being brought forward now was in bad faith.
“All transactions, including the sale of their Nexo tokens, were completed in good faith, were documented and were accepted as final by the claimants at execution. Having made substantial profits from trading their Nexo tokens, the claimants withdrew all their assets from the Nexo platform,” the lawyers said.
Industry watchers will just have to wait and see how this case unfolds and who the law decides to side with.