What’s Wrong? Nexo Disbands Subsidiaries

The cryptocurrency lending company Nexo is working to dissolve two of its subsidiaries in the UK. According to a regulatory filing with the UK Companies House, the entities are Nexo Financial Services Limited and Nexo Clearing.

Nexo Co-Founder Antoni Trenchev, however, told the outlet that the company has no plans to leave Europe. The company claims that, instead, it is only part of the companys restructuring plans.

In addition to cryptocurrency trading and custody, Nexo provides its customers with a range of financial services based on cryptocurrencies, such as debit card services, loans, and savings accounts. On its website, these savings accounts claim to pay “up to 15% APR on your crypto,” with rates occasionally reaching 7% for Bitcoin and 12% for USDC.

The latest development coincides with Nexo's ongoing legal dispute in Bulgaria. Prosecutors in Bulgaria opened an investigation into Nexo in January over alleged anti-money laundering (AML) violations and transgressions of sanctions imposed on Russia. 15 offices of Nexo in Bulgaria were raided as part of the investigation by local investigators in Bulgaria working with foreign agents. Additionally, it was claimed by the prosecution that one of Nexo's clients is connected to financial terrorism.

A media source reported that Siika Mileva, Bulgarias Prosecutor General, through a spokesperson, alleged that Nexo Co-Founders, who are Bulgarians, ran shell companies. Mileva noted that over the previous five years, Nexo processed more than €94 billion.

Nexo, in response to the news, condemned the prosecutors in a lengthy Twitter post. The firm noted that it had rejected a lot of business opportunities as it never compromises with its very stringent AML and know-your-customer policies.

Meanwhile, in the United States, Nexo recently paid $45 million in penalty to the Securities and Exchange Commission (SEC) and other state regulators for offering and selling crypto which the SEC considers as unregistered securities. The federal securities regulator got $22.5 million while the remainder went to state financial watchdogs.

The cryptocurrency lender also made an additional $1.5 million payment to the State of New York for services provided through the Nexo Exchange virtual currency trading platform.

Regulators in the US have expressed severe scepticism about cryptocurrency-based interest-bearing accounts, criticising them for having exceptionally high savings rates in comparison to conventional savings accounts. Federal deposit insurance does not apply to crypto financial platforms, unlike chartered banks.