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Germany’s Federal Financial Regulator Warns Investors Over Bulgarian Crypto Broker

Bulgarian crypto broker, 5 Capital, has been offeringfinancial services to investors without being approved by the Germany financial watchdog, the Federal Financial Supervisory Authority (BaFin). This is against the regulations that guide crypto firms in Germany, as every crypto firm is expected to apply from and obtain an authorized license from BaFin before entering into operation.

In the report, BaFin pointed out that the mentioned Bulgarian crypto broker, which is based in Sofia, offers German customers contracts for difference (CFDs) that supposedly expose them to cryptocurrency instruments.

As a way to keep Germany crypto market safe and reliable, crypto firms operating in Germany are expected to apply for a license from BaFin by the end of 2019 as the new anti-money laundering (AML) regulations have been put in place.

Being wary of the cryptocurrency industry, BaFin has been warning investors about the potential risks associated with the market, especially Bitcoin and other cryptocurrencies. It also warned clients over initial coin offerings (ICOs), informing them of the high risk often associated with various unrealistic technological claims and even scams projects. It focused on brokers who do not provide negative balance protection, which exposes investors/customers to unlimited losses.

BaFin then encouraged traders to be careful while on the 5 Capital website. They advised clients against funding an account or investing via this specific company, strongly warning that non-compliance would not receive any assistance if he/she is duped. What this means is that if 5 Capital ever wishes to function, it has to apply for a license and be in full compliance with BaFin regulations by the end of the year.

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Bulgarian Authorities Accuse Four Persons After Nexo Office Raid

Reports indicate that after the execution of a search warrant at the offices of the cryptocurrency lender Nexo in Sofia, the capital city of Bulgaria, four persons have been charged with criminal offenses and brought before the appropriate authorities.

In a report that was made public by Bloomberg on the 13th of January, the police in Bulgaria have allegedly charged four people of Bulgaria of being the founders of an organized criminal enterprise. This organization is accused of participating in criminal activity, including money laundering and banking without a license.

As a result of the inquiry, the nation’s National Police Service was able to seize a number of valuables, as indicated by the reports. Cash, computers, and several cryptocurrencies were included in these assets.

Nexo said in an interview after the raid that took place on January 12 that the actions performed by the prosecutors were of the “kick first, ask questions later” kind.

Reports state that the company wanted to file a lawsuit in order to seek restitution for damages caused by the behavior of law enforcement. The company is said to have stated that authorities did not identify themselves to Nexo workers nor did they deliver a search warrant to Nexo employees. It is unknown who the persons detained were, nor what responsibilities those individuals may have had at Nexo previous to their arrests. It is also unknown why those individuals were arrested. Over 600 individuals call the loan firm in Sofia, Bulgaria their place of employment.

Nexo is an investment platform that was launched in 2018 and enables users to borrow money against bitcoin while also allowing them to stake their own cryptocurrency holdings.

Although the company has locations in the United Kingdom, Switzerland, and Bulgaria, it is rumored that it does not offer its services to residents of Bulgaria due to the risk of getting into legal trouble with the Bulgarian government. This is because the company has locations in the United Kingdom, Switzerland, and Bulgaria.

In December, Nexo made the statement that it planned to progressively remove its services from the United States. The company cited the lack of a clear and regulatory-compliant route ahead as the rationale for this decision.

Scammers Target Australians in Cryptocurrency Call Center Scheme

It has come to light that people of Australia are the principal targets of a sophisticated multinational network of con artists that operate out of call centers focused on bitcoin. The network is believed to have originated in China. The heart of operations for the network may be found on the continent of Australia. It is commonly believed that the administration of this network is being handled by criminal syndicates that have their headquarters in Israel.

As part of a large-scale operation, law enforcement officers from the countries of Serbia, Germany, Bulgaria, and Cyprus carried out house searches in a total of eleven locations across the country of Serbia, including four call centers. These locations included the country’s capital city of Belgrade. Officials from the island nation of Cyprus were responsible for the operation’s coordination. During the course of this operation, they discovered evidence showing that Australians were among the citizens of all of the other countries who were exposed to the highest degree of examination. This information suggests that Australians were among those subjected to this level of inspection. The material was made available to the general public on February 23 via the dissemination of an article that had been authored by The Australian and published on that day.

Fifteen individuals and about 1.46 million dollars’ worth of cryptocurrencies were seized into custody as a direct result of the operations, which were carried out as a direct consequence of the acts.

It would seem that con artists who work out of these contact centers are using advertisements on social media in an effort to persuade fresh victims into falling for their schemes. They achieve this goal by ensuring prospective investors that any investments they make would result in a significant return on the cash that they have invested. The findings of the research reveal that individuals do engage in this activity, which testifies to the notion that it is prevalent since it indicates that people do participate.

Nexo Seeks $3 Billion in Damages from Bulgaria Over Investigation

Nexo, a cryptocurrency lending platform, has taken a significant legal step against the Republic of Bulgaria, seeking $3 billion in damages. This arbitration claim, filed through the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C., centers around allegations that Bulgaria engaged in wrongful and politically motivated actions against the company.

The origins of this conflict trace back to an investigation launched by Bulgarian prosecutors in early 2023. Nexo’s offices were raided over allegations of participation in an organized criminal group aimed at profiting from crypto lending. Four Bulgarian nationals, including Nexo co-founders Kosta Kanchev, Antoni Trenchev, Trayan Nikolov, and Kalin Metodiev, were charged following these raids. However, in December 2023, the case was dropped due to a lack of evidence and Bulgaria’s absence of a legal framework for crypto assets.

Nexo alleges that the investigation was baseless and has had a severe impact on its business operations and reputation. The company claims it was in the process of working with U.S. banks on an initial public offering (IPO), with a valuation estimated between $8 and $12 billion. Additionally, Nexo was reportedly close to finalizing a sponsorship deal with a major European football club, which would have significantly boosted its global exposure. Both of these lucrative opportunities were lost due to the investigation.

Apart from these setbacks, Nexo also faced legal challenges in the United States. The company agreed to a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) and North American Securities Administrators Association (NASAA) over its Earn Interest Product. This led to Nexo discontinuing the product in April and eventually winding down its U.S. operations, citing a lack of regulatory clarity.

Nexo’s legal team, led by U.S. law firm Pillsbury Winthrop Shaw Pittman LLP, argues that the investigation by Bulgarian authorities was unjustified and oppressive, leading to significant financial and reputational damage. The claim, filed by Nexo’s Swiss subsidiary Nexo AG, seeks to recover lost opportunities and damages caused by the allegations.