Cryptocurrency lending platform Nexo, based in the US, faces a class action lawsuit over the suspension of XRP services on December 23, 2020.

The main plaintiff, California resident Junhan Jong, filed a complaint on Thursday. In the complaint, Nexo is accused of violating a user agreement by stopping the use of XRP as collateral without prior notice to customers. The suspension of the transaction follows a lawsuit by the US Securities and Exchange Commission against Ripple Labs to conduct unregistered securities trades on December 22.

Nexo allows users to borrow fiat or stablecoins with over-collateralized loans backed by cryptoassets. If price fluctuations in the cryptocurrency markets cause the loans to fall short of the loan-to-value ratio required for the platform, the complaint refers to Nexo’s terms of service, which states that “Nexo – after notifying the client – sells securities to bring LTV Relationships at stake again. ”

Jung says Nexo responded to the Securities and Exchange Commission’s announcement to suspend the use of XRP as collateral for loan repayments and contributions on December 23rd. As a result, many users were again unable to maintain their credit centers, leading to massive filtering by platform.

In addition, the plaintiff claims that Nexo “unreasonably” sold XRP to customers and confiscated the proceeds, stating:

“Given that the price of XRP has dropped significantly, on December 23, Nexo suspended customers from using XRP to participate as collateral or repay loans, and did so without notice of the suspension. Nexo did this because they did not want to participate in XRP ownership at its dramatically reduced value – not because Nexo believed the SEC announcement recommended not using or selling XRP. ”
According to the lawsuit, the suspension of Nexo’s operations resulted in the liquidation of more than $ 5 million in client assets. The plaintiff also argues that the liquidation of Nexo’s XRP contradicts the company’s claim that it does not own the ownership of the users’ warranties.

Jung seeks compensation for the alleged losses incurred as a result of the XRP suspension, as well as a ruling confirming Nexo’s contractual rights:

“A statement of the contractual rights of the parties is necessary because the respective rights and obligations are fundamental to the operation and use of Nexo Crypto Trust, and because publicly available Nexo data shows that the parties consistently and sincerely argue over these rights and obligations. … ”
In response to the allegations, Nexo indicated that it is one of several companies that have suspended their XRP lines of credit due to regulatory uncertainty.

The company stated: “The actions taken by Nexo based on legal advice were in accordance with the laws, regulations, terms and conditions of the company and are aimed at protecting the company and its customers.”

Nexo confirms that XRP charging will remain available on the platform for all users.

The platform also said it was targeted “in the media and various communication channels of several clients that were liquidated as a result of the XRP crash in December 2020.”

Nexo said it will respond to “frivolous lawsuits” with “equal severity and through applicable legal instruments and mechanisms.”

In fact, the platform recently filed a libel suit against former customer Lance Johansen due to several negative reviews that the defendant posted on Trustpilot’s review platform in early 2021.

Specifically, Nexo refers to Johansen’s comments and claims that the platform is operated by a former criminal, uses bot accounts to spread fake news, and that it “deliberately stole all XRP holders” by suspending the token.

Source: CoinTelegraph