Cryptocurrency lending platform Nexo has been indicted in court by an XRP user for losses incurred after the platform suspended XRP trading.
Following legal action against Ripple by the Securities and Exchange Commission (SEC) in December, Nexo halted all XRP trading.
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But a California resident, Junhan Jeong, who reportedly lost money from the move, is suing Nexo for $ 5 million. Jeong obtained a trust loan from Nexo using his XRP holdings.
Nexo was unable to notify users
However, just 24 hours after the SEC’s case against Ripple was filed, Nexo decided to suspend users’ ability to repay their loans using affiliate cryptocurrency XRP. Furthermore, the allegations indicated that Nexo failed to notify holders before making the hasty decision that caused financial losses to many users.
“Nexo’s failure to provide such notice had the effect of destroying the contractual rights of Nexo’s clients,” Jeong’s legal representative stated in a court document.
Since clients were unable to sell their tokens, it triggered a series of liquidations of hundreds of clients.
Nexo punished clients for not maintaining LTV ratios even when it was the same company that prohibited them from maintaining them.
Jeong says that the company’s decisions have earned him $ 269,300 in XRP tokens that were initially posted as collateral. Hundreds of other customers also lost different amounts.
The price of XRP hit a record low following the SEC’s lawsuit against Ripple and its executives, as it fell from $ 0.45 to $ 0.17 in just a few days.
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Nexo defends its decision
Declining XRP prices following regulatory problems meant that some clients would have to add more funds to maintain their LTV ratios. As some of the clients were unable to maintain this relationship, this led Nexo to liquidate funds. But Nexo has defended its decisions, claiming that the firm operated under a legal and regulatory framework, as well as its terms and conditions. The company stated that the decision it made was to protect its customers in a period when XRP was facing regulatory problems.