After Celsius, the scandal seizes Nexo and its 12 billion in management

After Celsius, it’s Nexo’s turn to sink into turmoil. The purge is not over and many Ponzian CrYpTo companies are under fire from critics and the market. Even the stablecoin tether is coming under coordinated attacks.

NEXO accused of liquidating its own customers

The @otteroooo twitter account claims that Nexo is speculating against its clients. According to several concordant sources, Nexo would have implemented a strategy aimed at liquidating its own customers.

Nexo is a Bulgarian company accepting all cryptocurrencies on deposit. The word “deposit”, as in the case of Celsius, is, however, overused. These are actually unsecured loans in favor of Nexo which can dispose of them as it sees fit. Like at Celsius.

The interest for its 4 million customers is to be able to use this deposit as collateral to be able to borrow in 40 different fiat currencies.

We can read on the site:

“Nexo lets you borrow in fiat or stablecoins (rates start at 5.9%) without a credit check. […] It is possible to borrow from $50 to $2 million […]. This service allows the borrower to avoid being taxed if he had to sell his cryptos to be able to borrow from a lambda bank. »

Except that when the value of this collateral decreases due to the collapse of the market, the customers are liquidated…

It would be a relatively mundane story if Nexo wasn’t accused of using its clients’ funds against them. Here is the supposed modus operandi:

1) Collect cryptocurrencies (especially shitcoins which tend to lose 90% of their value in bear market) through their loan service or by offering staggering rates;
2) Sell their clients’ cryptocurrencies to manipulate their price downwards on theexchange Londoner CEX.IO;
2) Liquidate clients now that the value of the collateral is no longer sufficient.

NEXO INSIDE SOURCES CONFORM NEXO LIQUIDATES OWN USERS FOR COMPANY PROFIT
“Insiders confirm that Nexo is liquidating its own customers to make a profit.
Whistleblowers working at Nexo confirm that Nexo trades against its clients. »

For @otteroooo, deposit cryptocurrency at Nexo “is tantamount to giving him ammunition to manipulate prices downwards”. “Nexo knows exactly what prices their clients’ cryptocurrencies need to fall for them to be liquidated.”

These accusations make sense when you know that these companies offer absolutely unsustainable Ponzian rates of return. When you don’t know where the performance comes from, it’s because you yourself are someone else’s performance…

If you don't undesrtand the yield, you are the yield
“If you don’t know where the return you’re being offered comes from, it’s because you are (someone else’s) return”

According to the sources of the anonymous twitter account, the Head of Trading of Nexo, Tom Stanev, was the person who had to quietly sell the cryptocurrencies.

We will see if some aggrieved customers take legal action. This will involve requesting accounts from the CEX.IO exchange to find out if NEXO has actually sold the cryptocurrencies of its customers.

Tether depeg?

A Wall Street Journal article earlier this week revealed that a number of hedge funds were selling short USDT. The positions would number in the hundreds of millions.

“There has been a real spike in interest from hedge funds looking to short tether”said Leon Marshal, a senior executive at Genesis Global Trading.

These funds are attracted by the still fresh smell of blood from the stablecoin Terra Luna. Its implosion indeed caused a contagion effect in other stablecoins whose pegs be momentarily shaken.

Tether (USDT) is still under pressure today, at 0.95 euros instead of one euro at the time of this writing. The parity is however respected for its version backed by dollars.

Paolo Ardoino, the CTO of Tether, said he was aware of these actions by some hedge funds. These latter “attempting to cause further panic in the wake of the Terra/Luna collapse”he launched. “We believe this has been a coordinated and sustained attack from the start by armies of trolls to generate FUD.”

Mr Ardoino blasted rumors that “Tether is not 100% covered”. “These hedge funds will only manage to lose money” he swore. “Tether is the only stablecoin with a proven track record of maintaining parity with the dollar despite extreme pressure.”

These rumors have stuck with Tether since the $42 million fine imposed by the Commodity Futures Trading Commission (CFTC). In question: “misleading statements and omissions” as to how Tether manages its reserves of euros and dollars.

We have since known that Tether generates profits by placing the money supposed to guarantee the peg in government and multinational bonds, among others. Opacity reigns, which incites hedge funds to test the liquidity of its reserves which weigh 66 billion dollars.

Tether seems solvent and will probably emerge stronger from this crisis. The abuses of Celsius and NEXO, however, reveal that it is time to refocus on bitcoin instead of getting stuck in a sea of shitcoins which always end in tragedy.

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Nicolas Teterel avatar

Nicolas Teterel

Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic, and libertarian prisms.

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