US-based crypto lending platform Nexo faces class action lawsuit for suspension of XRP services on December 23, 2020.
The main plaintiff, Junhan Jeong, a California resident, filed the complaint Thursday. The complaint accuses Nexo of violating its user agreement by suspending the use of XRP as a loan guarantee without notifying its customers first. The suspension followed the United States Securities and Exchange Commission legal action against Ripple Laboratories to lead unregistered securities offers December 22.
Nexo allows users to borrow fiat currency or stablecoins using oversized loans that are secured by crypto assets. If price fluctuations in the crypto markets cause loans to no longer meet the platform’s required loan-to-value ratio, the complaint cites Nexo’s terms of service as stating that “Nexo, after notifying the customer, will sell the collateral to bring the LTV ratio back online. “
Jeong alleges that Nexo reacted to the SEC announcement by suspending the use of XRP as collateral, to repay loans and for staking on December 23. the platform.
Further, the plaintiff alleges that Nexo “unjustifiably” sold its customers’ XRP and pocketed the proceeds, stating:
“Seeing the price of XRP drop significantly, on December 23, Nexo suspended the use of XRP by its customers to participate as collateral or repay loans and did so without notice of the suspension. Nexo did this because it didn’t want to end up holding XRP at its significantly reduced value, not because Nexo believed the SEC announcement advised against the use or sale of XRP. “
According to the lawsuit, Nexo’s suspension resulted in the liquidation of more than $ 5 million in customer assets. The complainant also alleges that Nexo’s XRP liquidations contradicted the company’s claim that it does not have any ownership rights over user collateral.
Jeong is seeking restitution for the alleged losses suffered by the suspension of XRP, as well as an order declaring Nexo’s contractual rights:
“A statement regarding the contractual rights of the parties is necessary because the rights and obligations at issue are essential to the very operation and use of Nexo crypto credit, and because Nexo’s public statements demonstrate that the parties have a fixed dispute. and real on these rights and obligations. “
In response to the allegations, Nexo Noted that it was one of many companies that, in response to regulatory uncertainty, suspended XRP lines of credit.
The firm said, “Actions taken by Nexo, on legal advice, complied with laws, regulations and company terms and conditions, and were aimed at protecting the company and its customers.”
Nexo maintains that XRP reloads and withdrawals remained available on the platform to all users.
The platform further claimed to have been the target of harassment “via various media and communication channels by several former clients liquidated following the XRP crash of December 2020”.
Nexo said it would respond to “unfounded prosecutions” with “the same gravity and through applicable legal instruments and mechanisms”.
Indeed, the platform recently deposit a libel lawsuit against a former client Lance Johansen about alleged “false and defamatory statements” the defendant posted on the Trustpilot review platform in early 2021.
In particular, Nexo is targeting Johansen’s comments claiming that the platform is operated by an ex-criminal, uses bot accounts to spread fake news, and has deliberately “robbed all XRP owners blindly.” By suspending the token.