A California resident has filed a class action lawsuit against cryptocurrency loan provider Nexo after it allegedly suspended trading of the XRP token. This comes a few short months after the announcement of a federal investigation into Ripple.
Lead plaintiff Junhan Jeong claims that Nexo failed to notify users of the move in his lawsuit filed in California federal court last week. Additionally, Jeong claims that Nexo then sold users’ XRP tokens without consent and kept the money. Jeong claims that he lost the equivalent of more than $250,000 to the cryptocurrency lender.
Jeong seeks to represent a nationwide Class of Nexo users, along with a subclass of California residents. He is claiming more than $5 million in damages.
The lawsuit says that since April of 2018, Nexo has operated a website that allows users to borrow cash — also known as “fiat money” — by putting up their cryptocurrency as collateral.
“Using Nexo’s ‘Crypto Credit,’ a customer takes out a ‘fiat loan’ by staking any variety of cryptoassets in their ‘Credit Line Wallet’ to serve as collateral and by funding a ‘Savings Wallet’ to serve as back-up collateral,” explains the class action.
The amount of cash Nexo users can borrow is based on their loan-to-value ratio, according to the complaint, and fluctuates depending on the cryptocurrency held as collateral by the company. If this ratio becomes too high, Nexo liquidates the collateral, says the lawsuit.
In December 2020, the Securities and Exchange Commission announced an investigation into Ripple, the company that offers XRP tokens, a type of cryptocurrency. Ripple and two of its executives were accused of raising billions by selling an unregistered security.
The announcement caused the value of XRP to drop by over 50 percent, says the class action lawsuit. In the aftermath, Nexo allegedly suspended the use of XRP tokens on its website as collateral for fiat loans, or cash.
Nexo then proceeded to seize and sell massive amounts of XRP that users had put up as collateral for their loans, says Jeong, who claims that the cryptocurrency lender violated its own terms and conditions.
Jeong also alleges that by freezing the use of XRP, Nexo effectively barred users from maintaining their loan-to-value ratios. The company then purportedly liquidated Nexo users’ collateral and kept the cash.
The class action lawsuit claims that Nexo breached its own contracts with customers and violated California consumer protection laws. Additionally, the plaintiff accuses the company of retaining money from the collateral it sold rather than giving it back to users.
Were your assets sold by Nexo? Were you affected by the Ripple investigation or suspension of the XRP token? Tell us about it in the comment section below!
The plaintiff is represented by Kyle W. Roche, Edward Normand, Katherine Eskovitz, and Stephen Lagos of Roche Freedman LLP.
The Nexo XRP Class Action Lawsuit is Jeong v. Nexo Financial LLC, et al., Case No. 5:21-cv-02392-NC in the U.S. District Court Northern District of California.
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21 thoughts onCryptocurrency Loan Provider Accused of Violating User Agreement, Claims New Class Action Lawsuit
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