Nexo, a popular Bulgarian-based lending and savings platform, has been criticized and accused of cheating its users in the wake of the massive drop in the crypto market on March 12 and 13.

The allegations relate to the liquidation of user accounts as a result of some cryptocurrencies dropping as much as 90% of their value on March 12 and 13, and how Nexo handled its liquidation mitigation program.

A similar mass liquidation has taken place for users of DeFi solutions based on “MakerDAO”.

How the Nexo platform works:

As the Nexo platform offers crypto lending services with the option for users to borrow dollars while depositing their crypto assets as collateral.

Read:Cryptocurrency exchange Binance lists the “Coinbase” stock symbol for trading today

The platform maintains a high loan-to-value ratio of 50% loan-to-value ratio, which means that an individual who wants to borrow $10,000 from Nexo needs to deposit $20,000 of cryptocurrencies used as collateral.

The user can redeem his collateral by paying the loan amount, meanwhile, failure to do so will allow Nexo the right to redeem the loan amount by claiming the proportionate value of the security principal.

As with most crypto-linked loan services, Nexo retains fees resulting from negative market fluctuations such as those that occurred on March 12 and 13.

The FAQ page on the Nexo website states that:

If the value of the collateral assets drops significantly, the customer will be warned to add more collateral, the customer will be notified, and the automatic partial repayment of the loan will start only after the loan is increased to a ratio of 83.3%.

The company also says that the customer will receive at least three notifications (via SMS and email) prior to this, i.e. before the liquidation occurs, with the expectation that the warnings will occur and the partially automated loan repayment with the loan-to-value increasing to 71.4%, 74% and 76.9%.

Read:Ripple Leads a $1.5 Million Coinme Investment Round

accusations:

In a live broadcast and a series of blog posts on fulcrumDavid Siaman and other Nexo customers claim that the company took advantage of the downturn in the crypto market to steal customer funds.

Allegations include that with the depreciation of crypto assets on March 12 and 13, Nexo failed to deliver on its promise to notify users (at least three times via different channels) before enforcing both automatic and manual payments using the collateral deposited on the platform.

The lender’s platform is allegedly inaccessible at the height of the market downturn, making it nearly impossible for affected clients to recover their accounts prior to liquidation.

Nexo responded and acknowledged that the SMS and email service experienced an outage, also saying that customers should not have relied on notifications about the status of their collateral assets but should have taken action before the market plunged.

In addition, Nexo, in a liquidation mitigation program, is asking users to deposit more collateral of crypto assets on the platform for the opportunity to recover some of the liquidated funds.

In a private email sent to one of its customers that cleared $124,592, Nexo asks for an increase in the region of 400-450 ETH or 8-10 BTC (equivalent to $63,000) to push the customer’s loan down to a lower percentage of the value.

Read:Partnership between Binance and the Argentine government to support blockchain projects

Other claims include a not-disparaging agreement where customers are required to agree to delete or not post any comments on social media or the internet to discredit Nexo.

For any breach, the User must pay £50,000 in accordance with the Agreement, as Users must sign this document to participate in the Liquidation Relief Program.

Meanwhile, Nexo is also alleged to have blocked social media and stopped responding to email inquiries from some of its customers most affected by the supposedly unfair liquidation.

Nexo’s response:

Mia Agova, Head of Public Relations at Nexo, shared the company’s official response to the issue, which explained that the March 12-13 crash affected everyone in the crypto space especially as Bitcoin alone fell by 47% during the black day.

According to a Nexo statement, the decline also led to the liquidation of some Nexo customers, including “David Siaman” and his associates.

The statement continued:

In addition to being bad for clients, liquidations are also bad for any lender’s loan book.

Managing it efficiently is essential to the financial health of businesses and customers alike, as one of the company’s founders, Anthony Trenchev, explains in depth in his latest Cointelegraph editorial.

Nexo offered treatment options to customers affected by the accident, which we are happy to say was well received, as this offer was also made to David Seaman, who we liquidated in March.

Despite the initial positive response and multiple attempts at dialogue, Mr. Siaman went through our offer and proceeded to threaten and slander Nexo and our employees via his social media and news channel.

Our policy has always been clear as we strive to provide our clients with the highest level of support and understanding.

At the same time, we firmly adhere to our business principles of protecting the interests of Nexo customers who gain interest in our product and the general interests of the blockchain space.

Read also:

A partnership between the “Nexo” project and “MasterCard” to launch bank cards that support crypto

Learn about the Nexo project and the NEXO cryptocurrency