Nexo faces case for liquidating $5m in consumer collateral amid XRP delisting
Apr 6, 2021 10:09 UTC
Apr 6, 2021 at 10:09 UTC
Crypto disposal platform Nexo has been defendant inflicting $5 million value of consumer liquidations when suspending the utilization of XRP as collateral suddenly in Dec.
United States-based crypto disposal platform Nexo is facing a class-action case over suspension of XRP services on Dec. 23, 2020.
Lead litigator, Calif. resident Junhan Jeong submitted the criticism on Gregorian calendar month one. The criticism accuses Nexo of breaching its user agreement by suspending the utilization of XRP as loan collateral while not notifying its customers beforehand. The suspension followed the SEC’s proceedings against Ripple Labs for conducting unregistered securities offerings on Dec twenty two.
Nexo permits users to borrow decree currency or stablecoins mistreatment over-collateralized loans that area unit backed by crypto assets. ought to worth fluctuations within the crypto markets cause loans to not meet the platform’s needed loan-to-value, or LTV, ratio, the criticism cites Nexo’s terms of service as stating that “Nexo can — when providing notice to the client — sell the collateral to bring the LTV magnitude relation back in line.”
Jeong alleges that Nexos reacted to the SEC’s announcement by suspending the utilization of XRP as collateral, to pay down loans, and for staking on Dec. 23. As a result, several users were left unable to support their loan positions, prompting wholesale liquidations across the platform.
Further, the litigator alleges Nexo “unjustifiably” oversubscribed off customers’ XRP and pocketed the take, stating:
“Seeing the worth of XRP therefore drop considerably, on Dec 23, Nexo suspended customers’ use of XRP to stake as collateral or pay down on loans and did therefore while not providing notice of the suspension. Nexo did therefore as a result of it didn’t wish to be left holding XRP at its considerably small value—not as a result of Nexo believing that the SEC’s announcement endorsed against the utilization or sale of XRP.”
According to the case, Nexo’s suspension resulted within the liquidation of over $5 million worth of its customers’ assets. The litigator conjointly alleges that Nexo’s XRP liquidations contradicted the company’s claim it doesn’t possess possession rights of users’ collateral.
Jeong is seeking restitution for the alleged losses incurred from the XRP suspension, alongside associate degree order declaring Nexo’s written agreement rights:
“Declaration concerning the parties’ written agreement rights is critical as a result of the rights and obligations in question area unit central to the terribly operation and use of the Nexo Crypto Credit, and since Nexo’s public statements demonstrate that the parties have a hard and fast and real dispute over those rights and obligations.”
Nexo is investigating the accusations, however, the platform recently filed a defamation case against its former client, Lance Johansen, over multiple negative reviews the suspect printed on review platform Trustpilot in early 2021.
In specific, Nexo is taking aim at Johansen’s comments claiming the platform is operated by associate degree ex-felon, uses larva accounts to circulate faux news, which it intentionally “robbed all XRP homeowners blind” through its suspension of the token.