Bulgarian authorities drop money laundering investigation into Nexo executives

Sofia City Prosecutor’s Office has concluded a high-profile investigation into the activities of four individuals linked to the Nexo online platform.

The investigation, initiated on September 29, 2022, focused on allegations of participation in an organized criminal group and unauthorized banking activities through Nexo. Four individuals were accused of operating an organized criminal group from 2018 to January 2023 under Art. 321 of the Criminal Code.

Additionally, two of the individuals faced charges for conducting unlicensed banking transactions from June 2018 to January 2023, which involved lending and deposit raising in various currencies on the Nexo platform without appropriate authorization under the Law on Credit Institutions (CLI).

The investigation entailed extensive procedural and investigative actions, including witness interviews with a secret identity, technical and banking expertise, and analysis of payment account movements. International cooperation was also evident, with European Investigation Orders and their subsequent responses playing a crucial role.

The technicality defense

Despite an elaborate investigation and international scrutiny, including administrative actions against Nexo in various US states, the supervising prosecutors concluded that the evidence did not substantiate the charges. No proof of a criminal association, banking activity without a permit, money laundering, tax crimes, or computer fraud was found against the defendants.

A key aspect of the investigation’s conclusion was the legal status of virtual currencies in Bulgaria and the EU. As per the European Banking Authority’s report and the current legal framework, crypto-assets are not recognized as legal means of payment or regulated financial instruments in Bulgaria and the EU. This lack of regulation was pivotal in determining that Nexo’s activities, which were primarily conducted online and likely managed outside Bulgaria, did not constitute financial crimes.

The settlement between Nexo and various US regulatory authorities further substantiated the absence of fraud or misleading practices in Nexo’s operations. This comprehensive analysis led to the termination of criminal proceedings, with the supervising prosecutors concluding that no crime had been committed under the current legal regime for crypto assets and financial services.

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