Crypto lender Nexo is being investigated by authorities in Bulgaria on suspicion of money laundering, tax offenses, banking without a license and computer fraud.
The Bulgarian Prosecutor's Office is conducting an investigation in Sofia to "neutralize the criminal activity" of Nexo, according to an automated translation of a statement issued on Facebook Thursday. More than 300 people are involved in the operation.
"The main organizers of the scheme are Bulgarian citizens, and the activity was carried out mainly from the territory of Bulgaria," Attorney General Siika Mileva said in the statement. "Evidence has been collected that a person who used the platform and transferred cryptocurrencies has been officially declared a terrorist financing person," according to the statement.
In a thread on Twitter, Nexo said it is cooperating with relevant authorities and regulators. It said it had stringent anti-money-laundering (AML) and know-your-customer (KYC) policies and implied it was being targeted unfairly.
"There are authorities at one of Nexo’s offices in Bulgaria, which is, as you know, the most corrupt country in the EU (European Union)," a Nexo spokesperson said in an email to CoinDesk. "They are making AML and tax-related inquiries about a Bulgarian entity of the group that is not customer facing, but only has back office functions – payroll, customer support, compliance. We are one of the most stringent entities with regards to KYC/AML."
Following news of the investigation, more than $3 million left the company's platform. The lender's native coin sank around 7% to as low as 70 cents. At the time of writing, it was priced at just under 73 cents.
Read more: Why Do Crypto Lenders Keep Blowing Up?
UPDATE (Jan. 12, 12:44 UTC): Adds additional detail from prosecutors' statement and market reaction in last two paragraphs.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.