Crypto bank files record $3 billion lawsuit against Bulgaria

Crypto bank Nexo has filed a record $3 billion lawsuit against Bulgaria over the actions of prosecutors and other state institutions against its executives, the company said on Wednesday.

It is the largest lawsuit ever brought against Bulgaria, which is facing another pending lawsuit by the heirs of the deceased oil magnate, Denis Ershov, who are suing Bulgaria for €1 billion in the International Centre for the Resolution of Investment Disputes at the World Bank, where the case from Nexo was filed.

“The amount of the arbitration claim is determined by the significant material and reputational damages resulting from the actions of the institutions during the now terminated, oppressive investigation against the company, its employees and executives,” Nexo claims.

“The accusations proved to be unfounded, and the pre-trial proceedings found their logical conclusion due to the absence of crimes,” they added.

Losing to this $3 billion lawsuit would have a devastating effect on the public finances of the EU’s poorest country since such an amount is equal to about 2.5% of the country’s GDP. Nexo AG, which was founded by Bulgarian entrepreneurs, is a Swiss-registered subsidiary of Cayman Islands-based Nexo Capital.

The crypto bank is suing Bulgaria mainly because of the criminal investigation launched by the Sofia City Prosecutor’s Office in January 2023.

The prosecutor’s office accused Nexo bosses of participating in a criminal group for money laundering, tax crimes, computer fraud and unlicensed banking. They then created an international wanted list of four people – Antoni Trenchev, Kosta Kanchev, Trayan Nikolov, and Kalin Metodiev.

A key element of the prosecution’s action, led at the time by then-fired chief prosecutor Ivan Geshev, was to prove Nexo’s political connection with the We Continue the Change party. The connection was that Nexo employees were donating money to the party.

The prosecutor’s charges remained unproven, but the activities of the crypto bank became the reason for the creation of a political parliamentary investigation. Less than a year later, the investigation was dropped with the argument that the crypto bank was being investigated for violating non-existent legal regulations.

Last year, the European Commission officially terminated the special monitoring mechanism on the Bulgarian judicial system, which was intended to monitor the actions of the prosecutor’s office.

According to Nexo’s lawyers, the “attack” by state institutions was accompanied by a “serious media campaign against the company” and “massive circulation of false claims” that caused colossal damage to Nexo’s business and international reputation.

The prosecutor’s attack has halted Nexo’s work with three of the largest US investment banks on the company’s initial public offering on a landmark US stock exchange, the company said. The valuation of Nexo given by these banks at the time was between $8 billion and $12 billion. Due to the actions of the Bulgarian prosecutor’s office, the confidence of investors was then shaken, and the company suffered damages of $3 billion, the company claims.

Nexo’s signing of a long-term partnership with one of Europe’s most popular football clubs, with over 330 million supporters worldwide, was also thwarted, the bank said.

Before this, Bulgaria lost the most significant international case against Russian company  Atomstroyexport over nuclear reactors that were ordered but never paid for. The company sued the state for €600 million for the manufactured equipment for the unfinished Belene nuclear power plant.

Three weeks ago, Bulgaria lost a lawsuit for €65 million that was filed by a Maltese company with Saudi owners who failed to implement a project for the construction of a photovoltaic park due to the fault of the Bulgarian institutions.

(Krassen Nikolov | Euractiv.bg)

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