- Popular lending platform Nexo has been charged with a class action lawsuit over the suspension of XRP.
- The lawsuit alleges that Nexo caused monetary losses of over $5 million for customers as a result of suspending XRP on the platform.
- Nexo says it was in adherence with regulations and its own terms and conditions.
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One day after the SEC filed legal action against Ripple in December 2020, Nexo suspended XRP. Now, one California resident is suing Nexo for $5 million in losses from the move.
Users Lose $5M in Nexo Debacle
The lawsuit has been filed by Junhan Jeong, a California resident who had taken out a fiat loan from Nexo using their XRP holdings.
The lawsuit alleges that “Nexo acted in bad faith” by suspending XRP payments for loans and caused monetary losses of over $5 million for Jeong and other customers in loan liquidations.
The suspension meant that users could no longer use the asset as supplemental collateral to maintain their loans.
As per the loan conditions, users have to maintain a specific loan-to-value (LTV), which is the ratio between the money borrowed and the collateral held in a customer’s Credit Line Wallet. If the ratio exceeds a certain threshold (83.3%), the customer must deposit more cryptocurrency as additional collateral to maintain the requisite LTV ratio.
If the customer fails to do that, Nexo begins to sell off the assets held in a customer’s wallet to recover the loan amount.
The SEC’s legal action crashed the price of XRP from about $0.45 to ~$0.17 in a few days. The declining XRP prices amid regulatory action against Ripple meant certain customers would need to add more funds (besides XRP) to maintain their LTV ratios. Eventually, Nexo had to liquidate some of their customers’ funds, who…