Nexo Says It’s Nothing Like Celsius And Other Crypto Lenders. Here’s What The Data Shows

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

But Nexo, which points to his certificates in real time from the accounting firm Armanino as proof that it has not followed the path of its competitors, also had to deal with a Twitter user who claims that its co-founder Kosta Kantchev embezzled funds from a charity association to build “a palace the size of a high school.”

In response to these claims, the company printed a rebuttal who dismissed the charges as a case of mistaken identity, writing that the account used “lies and distortions in yet another smear campaign against Nexo.”

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The company’s legal department also got involved by sending a cease and desist letter to the person who manages the Twitter account.

“He claims a lot of things, but that we are insolvent. is not one of them,” Trenchev said. Decrypt. “It’s a prediction that we’ll be insolvent by the end of the year, and they haven’t backed that up significantly.” (Disclosure: Nexo is one of 22 investors in Decrypt.)

Trenchev said Nexo seems to be just like its crypto lending competitors, which typically take client funds and stake them in yield-generating protocols or do what it considers collateralized lending. Nexo is fundamentally different, says Trenchev, and hasn’t resorted to any of the same measures to stay afloat.

These measures include freezing or limiting withdrawals, like Celsius, or finding a revolving line of credit, like BlockFi. Voyager had to do both.

Like its competitors, Nexo lends funds to its customers and uses the proceeds to pay interest. blockchain Nansen analysis platform has identified more than 500,000 wallets as belonging to Nexo.

This includes one that Nansen identified as Nexo’s 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)-i.e., ETH that has been locked to the Ethereum 2.0 beacon chain via Lido service provider.

A Nansen dashboard showing some of crypto lender Nexo’s biggest wallets. 1 credit

Another of company wallets included in the Nansen dashboard showed that Nexo had deposited $579 million worth of wrapped Bitcoin (wBTC) as collateral in a ManufacturerDAO safe and had an outstanding balance of $50 million AID.

All this to say that a significant portion of the capital sitting in Nexo wallets is held in the form of ETH, stablecoinsor have been loaned to protocols that require loans to be over-collateralized.

Unlike its competitors, Nexo claims to only make oversecured loans. This means it tends to pay lower returns than BlockFi and Celsius, but exposes customers to “a priori no risk“, according to its website.

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

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

The firm has also worked with several investment banks, including Citigroup, to explore acquisition opportunities for struggling 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.

Lately, it has often happened that when a big player in a crypto category goes down, their peers come under scrutiny just because they seem to have similar businesses.

It happened to stablecoins after TerraUSD (UST) lost its peg and went to zero. Tether (USDT) and Circle’s US Dollar Coin (USDC) were quick to draw a line in the sand to separate their stablecoins, which are allegedly backed by an equivalent reserve of US dollars, from Terra’s algorithmic coin, which was originally backed by nothing at all, then later a mix of other cryptocurrencies, including Bitcoin.

Case in point: Tron’s algorithmic stablecoin USDD, which founder Justin Sun said is safer than UST because it’s oversized, no longer has its 1:1 peg to the US dollar since June 12 . On Monday afternoon, it was trading at $0.98, according to CoinMarketCap.

After the fall of Terra, there was a rush of its investors, venture capitalists, to say whether they were exposed. Over the course of a few weeks, revelations came from Mike Novogratz, CEO of Galaxy Digital, Capita dragonflyI, Multicoin Capital and others.

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

The company is able to check the balances of its customers’ bank accounts and crypto wallets on a daily basis, compare them to its debts or money it owes its customers, and assess the health of the business of ready. The idea is that transparency will help companies avoid what happened at Celsius, where Armanino partner Noah Buxton said Decrypt there was an asset-liability mismatch and a maturity issue, all at the same time.

He said that’s the problem the team behind TrustExplorer, which started out as a reserve verification tool supporting stablecoins, focused on adapting it for lenders. In fact, it was Nexo that prompted them to do so in 2021.

“[Lenders] have notes with counterparts. They have assets listed on global exchanges, they also have some DeFi exposure,” Buxton said. “So we’re looking at a number of things on the asset side, probably, honestly, 50 different sources of assets that we attract, but then this liability is the two.”

While Armanino’s attestations may differentiate Nexo from other lenders and reassure crypto market watchers, it is important to note that attestations are not the same as audits. And given the current state of the market, it’s not hard to understand the growing skepticism in the crypto lending market as a whole, including Nexo.

This skepticism is not lost on Nexo or its accounting firm. “Nobody trusts anybody, even if you show them the proof in the face,” Buxton said.

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Nexo Says It’s Nothing Like Celsius And Other Crypto Lenders. Here’s What The Data Shows


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