Nexo co-founders Antoni Trenchev and Kalin Metodiev insist that the platform is solvent, days after the California Department of Financial Protection (DFPI) and seven other states issued a cease and desist order.
The crypto lender has been the subject of speculation since Celsius and Voyager filed for Chapter 11 bankruptcy following the TerraUSD collapse and the failure of the crypto hedge fund Three Arrows Capital.
Nexo is resilient in a weak market, argue co-founders
Metodiev said, “Unfortunately, we predominantly see the color red on our charts and our computer screens. But it is our firm conviction that it has been on numerous occasions in the past in numerous other market environments.”
He added that the platform has proven its resilience numerous times, explaining, “we had a collateral which was placed on one of the popular Defi platforms against which a loan was obtained by Nexo as an institution so that we can re-lend it…”
Metodiev assured that “It’s business as usual for us,” with Trenchev insisting, “Don’t panic; don’t make conclusions.”
Metodiev added, “Insolvency, bankruptcy is nowhere in Nexo’s reality, and we believe, we hope, we aspire,” while working hard to deliver a strong and sustainable future to the users.
States combine action against Nexo
On the regulatory front, eight states brought cease and desist orders against the crypto-lending platform in connection with its unregistered, yield-bearing cryptocurrency product; Trenchev explained that after the BlockFi order, Nexo stopped onboarding new clients in the United States for its lending product.
He said, “They are wary because they were, unfortunately, some bankruptcies in the past few months, and obviously they have to step up for their mandates for investor protection.”
In Feb, the Securities and Exchange Commission charged BlockFi Lending LLC (BlockFi) with $100 million in penalties for failing to register the offers and sales of its retail crypto lending product.
Similar yield-bearing products were also launched by Celsius in the past that attracted the regulator’s attention before the platform went defunct in July this year.
“I believe that we have demonstrated every single day of Nexo’s existence that we provide an actual service that is based on our technology, and based on a sound business model founded into its risk management protocols, which are uncompromising,” Metodiev said.
Assets exceed liabilities at the group level
Trenchev also addressed the questions arising on Nexo’s balance sheet and net position in Nexo token. He said company data was presented to the regulators as part of the cooperative approach. He remarked, “They asked for a snapshot of one of the entities of the Nexo Group.”
Further adding that there are over 20 companies within the group where assets exceed liabilities, even if you take out the net position of Nexo entirely.
The insolvency rumors erupted in Sept. when Dirty Bubble Media’s Mike Burgersburg tweeted that the Kentucky state regulators claimed that “Nexo Capital Inc is insolvent without their $NEXO token holdings.”
He further compared the situation of Celsius and Nexo, stating, “This is the same situation that killed Celsius Network – they were always insolvent without CEL.”
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