Crypto

Nexo Users Don’t Have ‘Unfettered’ Right to Withdraw Their Crypto Holdings, Exchange Says

Monday, December 19, 2022 12:33 PM

Nexo says its clients have no “unfettered” right to withdraw their assets from its exchange

Crypto exchange Nexo has said its customers have no “absolute” right to withdraw their cryptocurrencies from its platform as it seeks to defend itself against a lawsuit in the High Court.

Instead, Nexo said its customers only have the right to “request” withdrawals, as the exchange said it reserves the right to reject any customer request and impose withdrawal limits. , as shown in court documents seen by City AM.

The claims come as Nexo fights to defend itself from a High Court lawsuit brought by a family of fintech entrepreneurs, over allegations it blocked the three investors from withdrawing their $126 million holdings (£107 million).

The three fintech entrepreneurs – brothers Jason and Owen Morton and their cousin Shane Morton – claim that Nexo then intimidated them into selling those assets back to the company at a discount or risk being prevented from withdrawing their assets.

In court documents seen by City AM, Nexo admitted to making the “withdraw” button “unavailable” on Shane Morton’s account.

The platform also claimed that it had not been “unable to verify” whether a button to convert between currencies had also been made unavailable to fintech entrepreneurs.

The exchange, however, denied making a “coercive threat”, as Nexo instead maintained that the three investors were “free to reject the proposal”.

Instead, he claimed that the three “sophisticated” investors “made the business decision” to sell their tokens following “back and forth negotiations.”

Investors say Nexo has grayed out the buttons used to withdraw assets, after the Mortons sought to withdraw their entire $126 million holding due to concerns over Nexo’s regulatory status with the Financial Conduct Authority (FCA) of the United Kingdom.

The Mortons, who previously held millions of exchange-specific Nexo tokens alongside tens of millions of Bitcoin, Pax Gold and Stellar, on the platform claim that Nexo imposed bespoke withdrawal limits on their accounts, before to prevent them from fully cashing out their crypto holdings. .

The serial entrepreneurs, who previously founded three tech companies in Malta, Estonia and the Dominican Republic, claim that Nexo then bullied them into getting a 60% discount on their Nexo token holdings in exchange for a complete removal of any withdrawal limit.

The deal saw the three entrepreneurs accept $38,948,743 worth of the dollar-pegged stablecoin Tether, in exchange for 38,793,323.7 Nexo tokens – worth around $85.4 million.

A spokesperson for the Mortons told City AM that investors “complained from the start that [their] the accounts were locked… Nexo now admits it’s true”.

“Nexo’s position in the litigation is that the Mortons, and indeed all users, do not have ‘an absolute and unfettered right to withdraw assets’, but merely ‘the right to ‘request ‘withdrawals'” which Nexo has ‘an absolute contractual right to … reject’,” the spokesperson said.

“This is news for [the Mortons] and will be something for the court to decide. But until then, what is clear is that Nexo’s attitude towards customer accounts will be of considerable concern to many,” the spokesperson said.

Nexo previously told City AM that it believes the Mortons’ claim was made “opportunistically” while claiming that investors made “substantial profits by trading their Nexo tokens.”

Nexo has been approached by City AM for comment.

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