Nexo says it’s not like Centipede and other cryptocurrency lenders. Here’s what the data shows

Ongoing liquidity issues at crypto lenders BlockFi, Celsius and Voyager Digital have put other crypto lenders in a hot spot, with some rushing to reassure customers that their funds are safe.

But Nexo who refers to His testimonials in real time From the accounting firm Armanino as evidence that it did not follow the path of its competitors, it also had to deal with a Twitter user who claims that its co-founder Kosta Kantchev embezzled money from a charity to build a “high school-sized mansion.”

In response to these allegations, the company has printed refute who dismissed the accusations as a case of misidentification, writing that the account used “lies and distortions in yet another smear campaign against Nexo.”

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Also share the company’s legal department by sending a file stop and desist letter For someone who manages a Twitter account.

“He claims a lot of things, but we are insolvent. Trenchev said. Decrypt. “It’s an expectation that we’ll be insolvent by the end of the year, and they haven’t been very supportive of that.” (Disclosure: Nexo is one of the 22 Investors in Decrypt.)

Trenchev said that Nexo looks exactly like its crypto-lending competitors, who typically take customer money and share it with revenue-generation protocols or do what they consider secured lending. Trenchev says Nexo is very different, and hasn’t resorted to any of the same measures to stay afloat.

These measures include freezing or limiting withdrawals, such as percentage points, or creating a revolving line of credit, such as BlockFi. Voyager had to do both.

Like its competitors, Nexo lends money to its customers and uses the proceeds to pay interest. blockchain Nansen analysis platform identified more than 500,000 governor It belongs to Nexo.

This includes that Nansen Identified as Nexo business cash. He had a balance of $169 million as of Tuesday morning. The majority of the funds, $104 million, were in Staked Ethereum (or stETH).– For example, ETH that is locked in Ethereum 2.0 Beacon chain via Lido service provider.

Nansen’s dashboard showcases some of the largest crypto lender Nexo wallets. 1 credit

last of Company Governor Listed on the Nansen dashboard shows that Nexo has deposited $579 million worth of encapsulated Bitcoin (wBTC) as a guarantee in a the manufacture company Safe and has an outstanding balance of $50 million helps.

All this to say that a significant portion of the capital held in Nexo wallets is held in the form of ETH, stablecoinsOr they have been lent to protocols that require loans to be excessively secured.

Unlike its competitors, Nexo claims to offer only hypersecured loans. This means that it tends to pay lower returns than BlockFi and Celsius, but it exposes clients to “Obviously there is no danger,” according to its website.

Trenchev said that Nexo did not use investor funding to meet its obligations to its customers, another detail he said sets it apart from other cryptocurrency lenders.

“We invested when the times were right for the space,” Trenchev said. “During this time, which took 18 months, I think it took us, we worked with Armanino, who are one of the top 20 auditors in the United States, to develop real-time certification that our assets exceed our liabilities by more than 100%.”

The company has also worked with several investment banks, including Citigroup, to explore acquisition opportunities for distressed companies.

“It’s basically up to us to do our best to help clean up the space in some sort of consolidation effort,” Trenchev said.

Recently, it has often happened that when a big player drops into a crypto category, their peers come under scrutiny just because they seem to have similar business.

It happened to stabilize currencies after TerraUSD (UST) lost its peg and went to zero. Circle’s Tether (USDT) and USDC (USDC) scrambled to draw a line in the sand to separate their stablecoins, which are allegedly backed by a US dollar equivalent reserve, from the Terra algorithm, which was originally not backed by anything at all, then Later a mixture of other cryptocurrencies, including bitcoin.

Case in point: Tron’s algorithmic stablecoin US dollar, which founder Justin Sun said is more secure than UST because it is so bulky, and has no longer had a 1:1 peg to the US dollar since June 12. According to him, it was trading Monday afternoon at $0.98 CoinMarketCap.

After the fall of Terra, there was Investors rush, owners of capital, to say whether they are exposed. Over the course of a few weeks, the revelation came Mike Novogratz, CEO of Galaxy DigitalAnd the Dragonfly is one’s headI, Multicoin Capital and others.

The problem facing Nexo, which is trying to differentiate itself from other crypto lenders, is one that Armanino has set out to solve with its TrustExplorer product.

The company is able to check the balances of the bank accounts of its customers and cryptocurrency wallets on a daily basis, compare it with its debts or the money it owes to its customers, and evaluate the health of the finished business. The idea is that transparency will help companies avoid what happened at Celsius, said Armanino partner Noah Buxton Decrypt There was a mismatch between assets and liabilities and an accrual problem, all at the same time.

He said that this is the problem of the team behind TrustExplorer, which started as a backup verification tool that supports stablecoins, and has focused on adapting it to lenders. In fact, it was Nexo that drove them to do so in 2021.

“[Lenders] You have notes with counterparties. “They have assets that are listed on global exchanges, and they also have some exposure to DeFi,” Buxton said. “So we’re looking at a number of things on the asset side, maybe and frankly, 50 different sources of assets that we’re attracting, but that responsibility is both.”

While Armanino’s certifications may distinguish Nexo from other lenders and reassure crypto market watchers, it is important to note that certifications are not the same as audits. Given the current state of the market, it is not difficult to understand the growing uncertainty in the crypto lending market as a whole, including Nexo.

Don’t waste these doubts on Nexo or its accounting firm. “No one trusts anyone, even if you show them the evidence in the face,” Buxton said.

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