So Nexo is offering up to 12% interest per
year on your crypto deposits, daily interest payouts, insurance of up to $375 million,
and on top of that you are able to withdraw your investment anytime. Furthermore, the company has an excellent
Trustpilot rating, a lot of mentions on websites like Bloomberg and Forbes as well as a real-time
audit of its assets under management by an independent auditor. Based on all those claims, you might get the
impression that itâs wise or safe to deposit your money on Nexo. But is Nexo really as safe as it appears? Letâs have a look at the results of our
due diligence about this crypto lending platform. [intro] I am your host Jakub from P2P Empire and if
your goal is to become a more educated investor, consider subscribing and hit that notification
bell to not miss any future videos. Nexo is a crypto lending platform that offers
interest on crypto deposits or crypto-backed loans. Nexo claims to be headquartered in London
but the real physical location of Nexoâs team is Sofia which is the capital of Bulgaria
- a country located in Eastern Europe. Nexo pays out between 1% and 12% APY on 24
different cryptocurrencies. Higher rates are, however, only available
if you hold Nexoâs own utility token in your Nexo wallet. Nexo has currently more than 2M users and
the platform claims that it has paid out more than $50 M in interest so far. As we are recording this video, the platform
is managing $13 billion in usersâ assets. In addition to that, the platform pays out
the interest daily and you can also exchange fiat or crypto directly on Nexo. Nexo is also offering a credit line, where
you will pay between 6.9% and 13.9% interest per year, depending on whether you hold the
Nexo token in your wallet or not. Nexo does, however, not disclose the borrowing
terms publicly. So you donât know them before you register
and apply for the loan. So now, you should have a basic understanding
of how the platform works. Before you decide to use any platform that
promises you âeasy returnsâ, you should always conduct your due diligence about the
platform and figure out the business model behind it. So letâs get into detective mode to see
whatâs up with Nexo. Nexo is dealing with your money and itâs
in your interest to figure out whether the company is trustworthy. Where is Nexo based? The first thing you want to find out is the
location of Nexo. You certainly donât want to be depositing
money into a company without knowing its location. As of right now, Nexo doesnât provide any
address on its website. In the footer of the page, you will be able
to find the name of the company Nexo Financial LLC. You have to google the company name to find
out that itâs based in London. Nexo has, however, also established companies
in Cayman Islands, Switzerland, Lithuania, Estonia, Hong Kong, or Delaware in the United
States. Nexo calls this type of structure the Nexo
Group. In reality, Nexoâs team and the product
are being developed by the company NDS which is located in Sofia, the capital of Bulgaria. You will by the way not find any information
about this company on Nexoâs website. The justification of this type of structure
is that every service of the Nexo platform is offered by a different company due to regulatory
requirements. Fact, is, however, that the core team as well
as the founders are based in Sofia and not in London as some of the media suggest. How is Nexo regulated? Obviously, this messy incorporation structure
can cause a lot of confusion. You might be wondering, where and how is Nexo
regulated? Well, this is constantly changing. A few months ago, Nexo has published a page
with all the licenses and registrations. You can tell that the entity in the U.S. has
some lending licenses in various states and that the Lithuanian entity has a crypto exchange
license. For several months, Nexo claimed to be regulated
in Estonia. Currently, you wonât be able to find it
anywhere as Nexo has deleted this claim from their website a few months ago. The regulator in Estonia actually published
a warning about Nexo Service OU, claiming that they are not a regulated lender in Estonia. This announcement had to be deleted as Nexo
filed a complaint against it and the court decided that the regulator has to refrain
from those types of warnings. We have been actually in touch with the Estonian
regulator earlier this year and the authority confirmed that Nexo was indeed never regulated
in Estonia. So Nexo was clearly misinforming its users
about being regulated in Estonia. Nexoâs insurance One of the big misconceptions of depositors
is that the deposited assets are insured. You should realize that the insurance covers
only assets that are stored in cold wallets. This is typically just a small fraction of
the total assets under management. Nexo, like any other crypto lending platform,
is deploying your assets to make a yield on them. If those assets are deployed, they are not
stored on a cold wallet and therefore not insured. The âinsuranceâ is therefore pretty useless
not only on Nexo but on most other crypto lending sites as well, so donât base your
decision of depositing crypto on a crypto lending platform just because they have insurance. Armanino Audit Nexo has also recently started a collaboration
with Armanino, that is supposed to be an independent auditor of Nexoâs assets under management. You can actually navigate to Armaninoâs
website to see for yourself how much money is Nexo managing. It might look like this is some kind of guarantee
or assurance that Nexo is indeed legitimate. Well, if you review the legal disclaimer on
Armaninoâs website, you can read that the information presented on this site shall not
be constructed as assurance. Furthermore, you can also read that all information
is provided "as is," with no guarantee of completeness, accuracy, timeliness, and without
warranty of any kind. Based on the legal disclaimer, you should
not rely on Armaninoâs audit. Nexoâs management Companies are run by people. Nexo was founded by Kosta Kanchev and Antoni
Trenchev who is also the CEO that is making regular appearances on various big media outlets. There was a third co-founder Georgi Shulev,
who is, however, no longer with the company. Kosta Kanchev is also the founder of Credissimo
a Bulgarian payday loan company. Antoni Trenchev was previously a member of
the parliament in Bulgaria. Both gentlemen have therefore good connections
to the politics in Bulgaria. Whatâs worth mentioning is that in March
2021, William Arthur Vesilind has joined the Estonian subsidiary as a board member. According to his linkedin profile he was previously
the executive director of TrustBuddy which is a Swedish peer-to-peer lending platform
that turned out to be a scam. This person has been removed from the board
this October so you wonât be able to find this information in the public business registry
anymore, but we have downloaded the entire history of the company in Estonia which we
will link for you in our in-depth Nexo review on P2P Empire. Whatâs also worth noting is that the Estonian
company is currently in liquidation. Nexoâs Services and Terms As a critically thinking individual, you should
always review the terms and conditions and evaluate whether the offered services are
legal and whether the risk that you are taking is worth the potential return. If you have been following our research, you
might have noticed that we have pointed out Nexoâs misleading advertising where the
company was promoting interest on FIAT deposits. You should know that offering interest on
FIAT without a banking license is illegal. Shortly afterward, Nexo has changed the information
on the website and clarified that the platform is offering interest on stablecoins that are
pegged to the FIAT currencies. When reviewing the general terms and conditions,
you will find out that Nexo is not liable for anything arising from your use of this
Website. If you have a look at the Nexo wallet Service
General Terms and Conditions, you realize that Nexo has the right to freeze your account
or restrict access to it. If this happens, you should not expect any
payment from Nexo as it is specified in the terms and conditions. By using the interest account, you agree that
Nexo might pledge, re-pledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer,
dispose of or use any amount of any Digital Assets. This means that Nexo can do whatever the company
wants to generate revenue with your assets. Whatâs alarming is that if you decide to
borrow money from Nexo, you wonât get any legal contract for it. There is no counterparty here. If you pay attention to the terms, you realize
that you are going into a contract with the âNexo group of companiesâ which are by
the way are nowhere to be found on the website. During our test of this feature, there was
indeed no counterparty, so you have no idea from where you are borrowing money from. Thatâs at least the case for users registered
in Europe. We are not aware of any law that would allow
giving a loan without a legal contract between both parties. This is potentially one of the largest red
flags and not something that should be ignored. XRP Lawsuit What you should also pay attention to is how
Nexo behaved during the collapse of the Ripple cryptocurrency in December 2020. The price of ripple has plummeted by more
than 50% within one week. At that time Nexo has been offering loans
backed by Ripple as collateral. As a response to the collapse of Rippleâs
price, Nexo has liquidated $5 million of customersâ assets. Nexo claimed that the users werenât able
to repay the loan or increase the collateral in time. Nexo users responded that they havenât had
such a choice as Nexo didnât alert the borrowers in time. As a response to this action, more than 100
users have organized a lawsuit in California. This is obviously not an easy case due to
the non-transparent structure of Nexoâs organization. The lawsuit was filed against Nexoâs entities
in the U.S., Great Britain, Estonia, Switzerland, and Cayman Island as itâs not clear which
entity is responsible. In July this year, the CEO Antoni Trenchev
asked the California court to drop the case, arguing that California has no jurisdiction
over it. He also stated that the loans were given by
the Caymen entity, Nexo Capital Inc. and the American Nexo Financial LLC received a lending
license in California in February 2021 after the events with Ripple. Zeus Capital & Chainlink Short Another case, worth mentioning is Nexoâs
connection to Zeus Capital, which was a company solely created to spread inaccurate negative
information about Chainlink to drive down its price. Several Twitter users have found a connection
to Nexo on Zeus Capitalâs website. Embedded within the Zeus website source code
were several instances of Typeform links connected to Nexoâs website. Nexo is denying any connection to Zeus Capital. However, Capital.bg which is one of a few
independent newspapers in Bulgaria has actually spoken to former employees of Nexo and they
confirmed not only the fact that Nexo is behind Zeus Capital but also that Nexo had an open
short position on Chainlink. If you donât know whatâs a short position,
itâs basically a bet that the price of an asset will go down. This indicates that Nexo is involved in market
manipulation and also uses your assets for speculation. The investigative journalist from Capital.bg
also found out that this situation resulted in many employees leaving the company. Some of them claim that they were even threatened
when they left. We will link you to the article in the description
below if you want to check it out yourself. Honest Opinion Alright, so those have been the facts. Now, whatâs my opinion on Nexo? Well, Nexo has set up a structure that protects
the interest of the company and allows it to not take any responsibility whatsoever. The company has misled the users on several
occasions in the past, including the offer of interest on fiat deposits or statements
about how they are regulated in Estonia. Nexo can do basically whatever they wish with
your deposits and amend the terms at any time. If you want to see a previous version of the
website to verify some of their claims, you wonât be able to, as they have excluded
their domain from websites that allow you to preview an older version of Nexo. If you reach out to Nexo with critical questions
you wonât get any answer. Nexo is also making a great job in moderating
negative Trustpilot reviews or any information on Reddit thatâs isnât aligned with the
companyâs interest. So based on all those points, we simply wonât
support this company. That being said, Nexo is by no means the only
company that is following questionable business practices but itâs one of the most popular
ones in the crypto lending space. There are obviously a lot of users, who have
been happy with Nexoâs services so far. We wonât be telling you what to do, we are
simply sharing our research with you, which might help you to evaluate the risk that you
are taking. Now, the information in this video is based
on our monitoring of Nexo over the last one and a half years as well as on the investigative
work from the Bulgarian newspaper capital.bg which took more than five months to complete. If you found it helpful, please hit the like
button and leave a comment to tell us what you think about Nexoâs business practices. If you want to support us more than just with
a like, you can also buy us a coffee on buymeacoffee.com/p2pempire. We will add all the relevant links in the
description below so you can review everything for yourself. Thanks for watching and I will catch you in
the next video.
