Lately, there has been trouble brewing in the crypto market. The heat has been felt by nearly everyone involved in the crypto industry, from hacking and declaring bankruptcy by the giant crypto exchange platform FTX to the suspension of transactions by Crypto.com.
Crypto investors and traders have had no chance at respite since the crypto world was chaotic a few weeks ago. Recently, an old feud brewing since 2020 between the Cayman Islands crypto exchange platform Nexo, and the fintech entrepreneurs, the Mortons, was reignited when Nexo was sued by brothers Owen and Jason Morton and their cousin, Shane Morton.
The fintech entrepreneurs, Mortons, have accused the crypto platform of freezing their accounts, stating that due to concerns about Nexo’s compliance with regulators and transparency, the Morton family had begun to slowly pull out their estimated finances of $126 million (£107 million) in December 2020 after hearing about Nexo’s regulatory status with the United Kingdom’s Financial Conduct Authority (FCA).
The initial plans of Owen, Jason, and Shane Morton were to slowly sell their Nexo tokens in small quantities so they would not destabilize the price of the cryptocurrency. The Mortons had tried to withdraw their funds when they noticed a “bespoke” had been placed on their accounts, limiting their daily withdrawal amount to $150,000 on 22 March 2021. This effect came unannounced to the Mortons, and so they took legal action against the company that alleges to be the first coin to pay dividends.
On the next day, 23 March 2021, Nexo further blocked the family from withdrawing all assets by disabling their withdrawal buttons and inevitably barring them from performing any actions that would result in giving them cryptocurrencies on the exchange platform.
The Mortons were likely not the only victims to have suffered such actions by Nexo. Two other traders had mentioned that their accounts had been barred from converting their Nexo tokens into other cryptocurrencies by disabling their convert buttons.
Perplexed by these sudden actions by Nexo, the fintech entrepreneurs had reached out to an employee of Nexo who supervised the coin’s exchange with the Mortons, asking for an explanation of the meaning behind their actions.
The High Court filings state that there had been a discussion with the Nexo account manager, who told the investors that their accounts had been deliberately frozen to support the price of Nexo tokens. The manager did, however, offer them a deal, stating that they could trade their Nexo tokens at a 60% discount on their market price, and the ban on withdrawals for the investors would be lifted. This unsavory deal witnessed the Mortons receiving $38,948,743 from the crypto lender platform Nexo.
Owen, Jason, and Shane Morton claimed that they were coerced into selling millions of Nexo tokens back to Nexo at a discount when according to CoinMarketCap, there was a chance for the funds to grow to $85.4 million in March.
In an account given by the three investors, they mentioned that they had tens of millions of dollars in cryptocurrencies like Pax Gold, Bitcoin, and Stellar, as well as millions of the company’s (Nexo) tokens.
Nexo boasts that all assets stored on its platform are fully backed. The crypto exchange also claims to have five million users and has processed over $130 billion in capital transactions for the past five years.
Previous Controversy Around Nexo
Nexo, the cryptocurrency exchange platform, is not new to being sued, as it had sued earlier in September 2022 by eight US state securities regulators representing California, Washington, New York, Maryland, Vermont, Kentucky, and Oklahoma.
The New York Attorney General, Letitia James, published a press release saying that Nexo and Nexo Capital both refused to enlist with the state’s securities and commodities dealers and lied to investors and traders about its registration status. Although the office of the New York claims that it warned Nexo to register, the office did not mention when it gave the warning to the crypto exchange platform.
Similarly, California’s Department of Financial Protection and Innovation released a cease-and-desist order against the company’s crypto-interest-bearing accounts.
Nexo, the crypto exchange platform, is under fire for intimidating the three investors, Owen, Jason, and Shane Morton, to sell off their tokens worth millions at a 60% discount in return for enabling their withdrawal button since it barred the entrepreneurs from withdrawing their $126 million (£107 million) on its platform.