Nexo price dropped 5% after office raid in Bulgaria. Analysis: What will happen to the coin next?

The Bulgarian offices of the cryptocurrency lender platform Nexo are being raided. According to prosecutors, the company is suspected of money laundering and tax violations. The news caused the platform’s native coin to drop almost 5% in 24 hours (from $0.7453 to $0.7116). At the moment, it continues to fall. 

The raid 

According to the Bulgarian General Prosecutor’s Office, 300 agents are working at the site. Everybody is being questioned, including managers. The full list of violations in which the company is allegedly involved consists of: 

• money laundering;
• tax fraud;
• computer fraud;
•  as well as crimes related to providing banking services without a license. 

Bulgarian authorities allege that the company conducted operations through numerous registered commercial organizations, most of which were fake. There is also information that one of Nexo’s clients has been officially declared a terrorist financier. 

“This company created and maintains a multinational platform for trading and lending cryptocurrencies. There was a pre-trial investigation, which alleges that the main organizers of the activity are Bulgarian citizens, and its main activities are carried out from the territory of Bulgaria,” the press secretary of the prosecutor’s office, Siika Mileva, said. 

The company reaction 

Nexo quickly reacted to the news about the police raids in Bulgaria. A few hours after that, the company’s representatives published a thread on Twitter in which they tried to explain what was going on. 

The company assures that it has turned down many suspicious transactions in recent years because they do not violate “very stringent anti-money laundering and know-your-customer” KYC is the mandatory process of identifying and verifying the client’s identity policies. 

Nexo also said it cooperates with relevant authorities and regulators.

We are always cooperating with the relevant authorities and regulators, and we are hopeful that we will have some exciting news in the weeks to come. 7/

— Nexo (@Nexo) January 12, 2023

Nexo’s co-founder Antoni Trenchev stated that Bulgaria is the most corrupt country in the EU and called the allegations “absurd.” 

“Nexo is one of the most stringent entities with regards to KYC and money laundering,” he emphasized. 

On January 11, Trenchev published a hopeful post on Twitter. In it, he stated that the industry has been and will continue to persevere, but in the case of Nexo, as we can see, something has gone wrong. 

How did the raid affect the price of the Nexo native token? 

The Nexo token, used to provide instant loans, gives users discounts on loan interest rates, and priority customer support, dropped in value because of the news of the raid. At the time of writing, the token is trading at $0.7116, down 4.74% from the day before.

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As for the market capitalization, it is equal to $406 million, thanks to which the coin is in 79th place on this index. The company was founded in 2018. The native coin reached its historical price high three years later. On May 15, 2021, you could buy NEXO for $3.8986. Compared to the current value, the difference is 448%, or 5.5 times less.

Because of the news of the raids, as well as the drop in value, experts have recorded an outflow of funds from the addresses associated with Nexo. Crypto intelligence platform Arkham Intelligence recorded the data. According to the report, the cryptocurrency lender started outflow of funds since the news was released. According to Cryptoslate, the amount of money involved is $9 million.

Floods of outflows seen from @Nexo wallet addresses on-chain.

This follows news that Nexo Bulgarian offices were raided by special police this morning.

Stay safe.https://t.co/kU5L01rjQ1 pic.twitter.com/ylPDn9j91z

— Arkham | Crypto Intelligence (@ArkhamIntel) January 12, 2023

Lookonchain analysts have also documented unusual transactions involving Nexo. According to their data, Nexo appears to be transferring U.S. dollars to exchanges such as Binance and Kraken to buy ETH, MATIC, APE, LINK, GALA,  and other cryptocurrencies in order to protect its funds. As a result, the company has received from the platforms: 

• 19,999 APE ($94.796);
• 84,998 LINK ($537.190);
• 5M GALA ($197.321);
• 5K ETH ($7M);
• 5M MATIC ($4.4M).

Nexo coin price predictions 

There is a chance that the news about the search will noticeably damage Nexo’s reputation. Such an event could mainly affect  outflow of customers, which we are now observing, a widespread decline in the value of the asset, and up to the complete collapse of the company. However, until the investigation is over, which can take a long time, it makes no sense to say for sure. Nexo’s 5% drop in token value is not as critical as FTT’s, for example, after the news of FTX’s crash. Then the exchange’s native token fell by more than 70%. 

Price prediction’s technical analysis shows that Nexo has every chance of reaching at least $1.09 in 2023. If we talk about the maximum price the coin can achieve, it’s $1.26. It’s still far away from the historical peak, but given the latest news, the coin may fall even lower.

Nexo’s past problems 

Nexo, founded in 2018 in Switzerland, operates a cryptocurrency investment platform that also allows users to bet on and borrow against cryptocurrencies. The company has 260 employees and 6 executives. The company currently manages assets for 5М+ users across 200 jurisdictions. The firm first ran into trouble in the United States in December 2022. 

At that time, the California Department of Financial Protection and Innovation filed an order in September to deny access to Nexo’s lending services. Eventually, Nexo decided to end its U.S. operations after failing to find a dialogue with local regulators. 

Following this news, the value of the native token fell from $0.6989 to $0.6512 (down 7.32%). Then it leveled off a bit, but exceeded its pre-news high only a month later, in January 2023. 

What’s the crypto community saying?

Based on the mood on Twitter, the crypto community reacted weakly to the news about the searches at Nexo. But for the most part, whoever commented on the events covered them with a positive attitude towards the company.

For example, user Jerry V Hall thinks that Nexo will be in the news a lot in the near future. He, on the other hand, is grateful that the company has fulfilled all the promises it made to him. In particular, the airdrop of the FLR token for XRP holders sponsored by the company.

There will be many things said about @Nexo over the next several months with all that legal stuff.

I say thank you Nexo for following through on every promise you made me.

you didn’t go under – you gave me my FLR – You honored your earn products.

Hats Off

— Jerry V Hall (@Jerryvhall1) January 12, 2023

And user Katz Vandal pointed out that the decline of the company’s assets is not critical, according to his calculations, Nexo lost about $150 million of a possible $3 billion. He also said that the platform is still working and that the actions of the feds will not prevent the company from developing further.

What do you think will happen to the token now? Share your opinion in the comments below.