Offshore cryptocurrency exchange gets clarity on trading account ownership and control from English High Court – JD Supra | Omd Cialis

In HDR v. Shulev and Nexo, the High Court considered entitlement to a cryptocurrency trading account and ownership of its content to be part of a stakeholder case brought under CPR 86 by a cryptocurrency exchange operator.1

stakeholder applications

Stakeholder requests (according to CPR 86) are used as a means of determining entitlement to money or goods held by a legal entity that is not itself entitled to money or goods. Among other things, it enables a stakeholder to apply to the court for an order to whom to pay a debt or money when competing claims relating to that debt or money are being made or are expected to be made by two or more people. Such proceedings are typically brought by financial institutions when multiple claims are made against an amount of money they are holding.

In this case, a stakeholder procedure has been initiated by HDR Global Trading Limited (“HDR“), a company incorporated in the Republic of Seychelles that operates BitMEX, a cryptocurrency exchange platform, to resolve a dispute over control and ownership of the contents of a cryptocurrency trading account opened in the name of the First Defendant ( “Mr. Schulev“).


The second defendant, Nexo Capital Inc. (“NEXO“) is a Cayman Islands company that operates a cryptocurrency-based lending platform, cryptocurrency exchange and wallets. In May 2019, Mr. Shulev (co-founder of Nexo Group and then director of Nexo) opened an account with BitMEX (the “Account”) using his Nexo email address. Thousands of bitcoins were subsequently transferred to the account from other Nexo accounts and various futures contracts were traded on the account. At the judgment date, the total value of the account was approximately £30m In September 2019, Mr Shulev’s appointment as a director was terminated and his access to the account was withdrawn.

A dispute then arose between Nexo and Mr. Shulev over the ownership of the assets held in the account. Mr. Shulev claimed that he opened the account in his personal capacity and that some of the crypto assets held there belonged to him. However, Nexo argued that Mr Shulev’s account was opened solely in his capacity as a director of Nexo; It was considered by Nexo to be a corporate trading account used for corporate purposes and it had corporate assets.

In response to the competing claims, HDR froze the account and initiated CPR 86 advocacy proceedings against both Mr. Shulev and Nexo in 2020.

claim to the account

On the day of hearing HDR’s stakeholders’ motion, Mr. Shulev and Nexo entered into a settlement agreement (the “approval“), which supposedly resolved the account’s ownership issue. However, the parties almost immediately got into another dispute over the agreement, in which they disagreed on whether it had been honored and the impact it had on the procedures of those involved.2 After discussion with the parties, the court allowed HDR to end the proceedings, directing HDR to hold the balance of the account as an interested party and directing it to transfer the balance (after deducting its costs) to the address ordered by the court .

While Judge Henshaw eventually found that the issue of entitlement to the account and ownership of its content was already duly resolved by the agreement, the ruling contains an interesting discussion of how English law addresses these issues.

Nexo’s key assertion was that while it was not specifically or fully identified to HDR as a party to the contract, it was nevertheless entitled to enforce the Account Agreement to HDR as an undisclosed principal.3 Under English law an undisclosed principal may sue and be sued against a contract made on his behalf by an agent acting within his reasonable powers to4 provided that:

(i) in concluding the contract, the agent intends to act on behalf of the client, and

(ii) the Terms of Contract do not exclude, expressly or by implication, the Client’s right and duty to sue.

Neither Defendant has suggested that point (ii) applies here. HDR’s terms of service for the account specifically provided for the ability for an individual to open and operate an account as a representative for another company. Likewise, neither party claimed that opening a crypto trading account for Nexo on BitMEX was outside Mr. Shulev’s authority as a director of Nexo.

The main point of contention was factor (i), namely whether Mr. Shulev intended to act on behalf of Nexo in opening the account or whether he intended to act in his personal capacity.

The High Court decision

The High Court eventually found the agreement valid and ruled who was entitled to the account. However, it also found that (if it had been wrong as to the validity of the agreement) Nexo would have been entitled to the account and its contents. This conclusion was based on a number of key findings:

(a) the purpose of creating the account appeared to be to allow Nexo to obtain a better rate than it received on its other corporate accounts;

(b) deposits into the Account were made from other existing Nexo corporate accounts;

(c) the Account was opened using Mr. Shulev’s Nexo corporate email address, as opposed to a personal or private email address;

(d) Other employees of Nexo had access to and transacted on the Account while there was no evidence that Mr. Shulev transacted on the Account; and

(e) Various communications from Mr. Shulev were expressed in terms (“we”) indicating that he considered the account to be a Nexo account and not a personal account.5

Overall, HHJ Henshaw believed that these factors indicated that “whether judged objectively or subjectively, Mr. Shulev intended to open the account on behalf of Nexo and hold Nexo assets”.6 As such, “Mr. Shulev owed and owes Nexo the duties of an agent to his principal in relation to the Account, including the duty to act on instructions from Nexo and to hold the Account and its contents on a trust for Nexo.”7


As the English courts increasingly consider crypto-asset-related disputes, this decision is part of evolving English case law in this fast-paced area. It serves as a valuable reminder of the usefulness of stakeholder applications, including for cryptocurrency exchanges who may need to resolve account ownership disputes when various competing claims to assets are made.

1 [2022] EWHC 1685 (Come).
2 These matters were also addressed as part of the judgment but are beyond the scope of this summary.
3 Alternatively, Nexo claimed as disclosed but not (fully) identified client, as Mr. Shulev demonstrated to HDR by using his Nexo company email address that he opened the account in his capacity as director of Nexo. This secondary claim was not considered in the judgment.
4 Siu Yin Kwan vs. Eastern Insurance Co Ltd [1994] 2AC199, [207].
5 [2022] EWHC 1685 (come on), [103].
6 [2022] EWHC 1685 (come on), [111].
7 [2022] EWHC 1685 (come on), [112].
8 See, for example, Tulip Trading Limited v. Bitcoin Association for BSV [2022] EWHC 667 (Ch), analysis of which is available here.

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