Nexo faces lawsuit for liquidating $5m in client collateral amid XRP delisting

United States-based crypto lending platform Nexo is dealing with a class-action lawsuit over suspension of XRP providers on Dec. 23, 2020.

Lead plaintiff, California resident Junhan Jeong submitted the grievance on April 1. The grievance accuses Nexo of breaching its consumer settlement by suspending using XRP as mortgage collateral with out notifying its clients beforehand. The suspension adopted the SEC’s authorized motion in opposition to Ripple Labs for conducting unregistered securities choices on December 22.

Nexo permits customers to borrow fiat forex or stablecoins utilizing over-collateralized loans which are backed by crypto belongings. Ought to worth fluctuations within the crypto markets trigger loans to now not meet the platform’s required loan-to-value, or LTV, ratio, the grievance cites Nexo’s phrases of service as stating that “Nexo will — after offering discover to the client — promote the collateral to convey the LTV ratio again in line.”

Jeong alleges that Nexos reacted to the SEC’s announcement by suspending using XRP as collateral, to pay down loans, and for staking on Dec. 23. Because of this, many customers have been left unable to assist their mortgage positions, prompting wholesale liquidations throughout the platform.

Additional, the plaintiff alleges Nexo “unjustifiably” offered off clients’ XRP and pocketed the proceeds, stating:

“Seeing the value of XRP thus drop considerably, on December 23, Nexo suspended clients’ use of XRP to stake as collateral or pay down on loans and did so with out offering discover of the suspension. Nexo did so as a result of it didn’t wish to be left holding XRP at its considerably decreased worth—not as a result of Nexo believed that the SEC’s announcement recommended in opposition to the use or sale of XRP.”

In response to the lawsuit, Nexo’s suspension resulted within the liquidation of greater than $5 million value of its clients’ belongings. The plaintiff additionally alleges that Nexo’s XRP liquidations contradicted the corporate’s declare it doesn’t possess possession rights of customers’ collateral.

Jeong is in search of restitution for the alleged losses incurred from the XRP suspension, together with an order declaring Nexo’s contractual rights:

“Declaration concerning the events’ contractual rights is critical as a result of the rights and obligations at situation are central to the very operation and use of the Nexo Crypto Credit score, and since Nexo’s public statements display that the events have a hard and fast and real dispute over these rights and obligations.”

Nexo is but to touch upon the accusations, nevertheless, the platform just lately filed a defamation lawsuit in opposition to its former buyer, Lance Johansen, over a number of damaging opinions the defendant revealed on overview platform Trustpilot in early 2021.

Particularly, Nexo is taking intention at Johansen’s feedback claiming the platform is operated by an ex-felon, makes use of bot accounts to disseminate faux information, and that it purposely “robbed all XRP homeowners blind” by means of its suspension of the token.