Nexo Sues Cayman Islands Financial Watchdog Over VASP License

Nexo crypto lender alleged that the Cayman Islands Monetary Authority had placed lots of weight on regulators’ enforcement actions in its decision to deny the registration.

During the same week that Bulgarian authorities were intensively raiding Nexo’s offices and indicting four people for charges related to money laundering, the crypto lender filed suit in the Cayman Islands.

In a document dated January 12, Nexo filed a lawsuit against the Cayman Islands Monetary Authority (CIMA) for denying its registration as a virtual asset service provider (VASP) within the island nation. The crypto lender asked the court to overturn the financial regulator’s decision as it was ‘suitable’ to offer crypto services to Cayman Islands residents.

Based on the court documents, Nexo applied to CIMA in January 2021, offering extra information at the request of the financial watchdog. But, the monetary authority asked for clarification on the application in October 2022, citing “certain legal and regulatory matters as noted in the news media” which Nexo had not revealed, and later rejected the application in December 2022.

Nexo claimed:

“The Authority breached its constitutional and statutory duty to provide comprehensible, satisfactory, and sufficiently detailed reasons for its Refusal Decision.”

The crypto lender alleged that CIMA has placed lots of weight on regulators posing enforcement actions on the crypto lender, citing some incidents in the United Kingdom courts. State-level regulators in the US also filed cease and desist orders against Nexo in 2022:

“[Nexo] had diligently cooperated with all US states and federal regulatory inquiries and has been proactive in maintaining dialogue with the respective regulators […] There have been some regulatory ambiguities concerning the laws and regulations applicable to digital assets in the US such that the fact of the regulatory enforcement itself does not connote any improper behavior.”

Nexo announced in December that it wanted to slowly cease operations in the US “over the coming months,” citing the absence of regulatory clarity.