Nexo is Rekto
Nexo headquarters in Bulgaria raided as part of a multinational investigation into money laundering, sanctions violations, and fraud. We warned you!
About eighteen months ago, we launched Dirty Bubble Media to investigate fraud and malfeasance. We spent a lot of our time focused on centralized cryptocurrency lending platforms (“CeFi”). We did so because it was easy to recognize the many warning signs: Unregistered offerings, questionable founders, absurdly high interest rates, and no clear mechanism for generating those rates.
We spent a good portion of time on the Celsius Network, a crypto lending firm that collapsed in June due to mismanagement and possible fraud. Their founder and CEO, Alex Mashinsky, was recently sued by the New York Attorney General for fraud. Another large crypto lending company, Blockfi, met a slower demise after it was temporarily “bailed out” by the FTX exchange. Of course, once FTX collapsed Blockfi followed shortly thereafter.
The last man standing of the cryptocurrency lending industry was Nexo, a Bulgarian firm operating in multiple countries. In September, we warned that Nexo was likely insolvent:
That month, multiple state securities regulators had filed cease and desist orders against Nexo. One of these orders from the state of Kentucky asserted that Nexo was actually insolvent without marking their holdings of their proprietary NEXO token to market. We demonstrated that this token was, like CEL and FTT, effectively worthless:
Per the Kentucky filing, Nexo sold 525 million tokens during the ICO, retaining the remaining 475 million $NEXO on its own balance sheet. Nexo could then mark-to-market their $NEXO holdings and show good financial health.
According to regulators, Nexo now holds ~95% of the total NEXO tokens in existence on its balance sheet. A quick glance at the token distribution on Etherscan bears this claim out, as the major addresses holding $NEXO are directly linked back to the company.
We showed that NEXO token was thinly traded on very questionable exchanges and that the volumes reported in the biggest market, MEXC Global, appeared entirely fake:
Oddly enough, when we looked at MEXC Global’s official Ethereum wallet, we discovered that it only holds 95,716 $NEXO tokens, despite hosting several millions of dollars worth of daily NEXO trades. In other words, MEXC Global’s daily NEXO trading volumes are roughly 40x higher than the total number of NEXO tokens they hold in their main wallet:
One of Nexo’s major appeals to transparency was their “real time audit” from the accounting firm Armanino. We talked about the problems with this supposed “audit” in December of last year:
Nexo initially fought back against our reporting, claiming that Nexo tokens were “less than 10% of total assets.” However, they never provided a claim regarding their NET assets. In December, Nexo abruptly announced that they would be leaving the United States due to “regulatory concerns.”
Today, it was announced that Nexo’s offices in Sofia, Bulgaria were raided as part of a multinational investigation into their firm. Allegedly, Nexo was helping Russian entities and individuals evade E.U. and U.S. sanctions:
An international operation against a large-scale scheme for financial crimes, money laundering and violations of international sanctions against Russia is taking place in Sofia at the moment. According to BNT, it is the company NEXO.
The investigation...began a few months ago, after foreign services detected suspicious transactions, which were reported to be aimed at circumventing the sanctions imposed by the European Union, Great Britain and the United States against Russian banks as well as companies and citizens of the Russian Federation.
.… In recent months, the FBI has been investigating the activities of the Bulgarian crypto platform due to data on a hidden hole in the amount of over 4 billion dollars from investors...."
This is an evolving story, and we look forward to learning more in the coming days.
Two parting notes: We observe that Armanino’s Real-Time Attest site still lists Nexo as “fully backed” as of this morning:
And that Silvergate Bank, under significant regulatory and legal scrutiny for banking the FTX fraud, was also providing banking services to Nexo:
Birds of a feather…
Look at their chart. The news are only circulating on "those who know" side. At the time of writing this comment and many hours after the raid, they are even in green. 1.4 million entered through Binance only, huge deposits are made RIGHT NOW. There is much more going on with these scammers.
The other interesting issue with Nexo is that up until very recently a lot of Crypto sites were still carrying Nexo advertising, so-called mainstream newsletters included. Nothing like just take the money and who cares about where it comes from.