Crypto exclusive: Nexo users do not have ‘unfettered’ right to withdraw holdings, exchange says
Crypto exchange Nexo has said its customers do not have the “unfettered” right to withdraw their cryptocurrencies from its platform, as it seeks to defend itself from a High Court lawsuit.
Instead, Nexo said its customers only have the right to “request” withdrawals, as the exchange said it retains the right to reject any customer requests and impose withdrawal limits, court documents exclusively seen by City A.M. show.
The claims come as Nexo is battling to defend itself from a High Court lawsuit filed by a family of fintech entrepreneurs, over claims it blocked the three investors from withdrawing their $126m (£107m) crypto holdings.
The three fintech entrepreneurs – brothers Jason and Owen Morton and their cousin Shane Morton – claim Nexo later intimidated them into selling those assets back to the company at a discount, on the threat they would be blocked from withdrawing their assets.
In court filings seen by City A.M., Nexo admitted it made the ‘withdrawal’ button “unavailable” on Shane Morton’s account.
The platform also claimed it had been “unable to verify” whether a button to convert between currencies had also been made unavailable to the fintech entrepreneurs.
The crypto exchange however denied making a “coercive threat,” as Nexo instead argued the three investors were “free to reject the proposal.”
It instead claimed the three “sophisticated” investors “made a commercial decision” to sell their tokens following “back and forth negotiations”.
The investors claim Nexo greyed out the buttons used to withdraw assets, after the Mortons sought to pull their entire $126m holdings over concerns about Nexo’s regulatory status with the UK’s Financial Conduct Authority (FCA).
The Mortons, who had previously held millions of the exchange’s own Nexo Tokens alongside tens of millions of Bitcoin, Pax Gold, and Stellar, on the platform claim Nexo put bespoke withdrawal limits on their accounts, before disabling them from cashing in their crypto holdings altogether.
The serial entrepreneurs, who previously founded three tech businesses in Malta, Estonia and the Dominican Republic, claim Nexo later intimidated them into taking a 60 per cent discount on their Nexo Token holdings in return for a complete removal of any withdrawal limits.
The deal saw the three entrepreneurs accept $38,948,743 worth of the dollar-pegged stablecoin Tether, in return for 38,793,323.7 Nexo Tokens – worth around $85.4m.
A spokesperson for the Mortons told City A.M. the investors “have been complaining from the beginning that [their] accounts were locked… Nexo now admits this is true”.
“Nexo’s position in the litigation is that the Mortons, and indeed all users, do not have ‘an absolute and unfettered right to withdraw assets,’ merely ‘the right to “request” withdrawals’ which Nexo has an ‘absolute contractual right to…reject’,” the spokesperson said.
“This is news to [the Mortons] and will be something the court will have to decide. But in the meantime, what is clear is that Nexo’s attitude to customers’ accounts will be a source of considerable concern to many,” the spokesperson said.
Nexo previously told City A.M. it believes the Mortons’ claim to have been brought forward “opportunistically” whilst arguing the investors made “substantial profits from trading their Nexo tokens.”
Nexo was approached by City A.M. for comment.