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Offshore cryptocurrency exchange obtains clarity from the English High Court on ownership and control of trading account – JD Supra

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

Stakeholder Applications

Stakeholder applications (made under CPR 86) are used as a means of determining entitlement to money or goods held by an entity that does not itself have a claim to the money or goods. Among other things, it permits a stakeholder to apply to the court for a direction as to whom it should pay a debt or money to, in circumstances where competing claims are made, or are expected to be made, in respect of that debt or money by two or more persons. Such proceedings are typically brought by financial institutions where multiple claims are made for a sum of money which they hold. 

In this case, stakeholder proceedings were commenced by HDR Global Trading Limited (“HDR“), a company incorporated in the Republic of Seychelles, which operates BitMEX, a cryptocurrency-exchange platform, in order to resolve a dispute over the control and ownership of the contents of a cryptocurrency trading account opened in the name of the First Defendant (“Mr Shulev“). 


The Second Defendant, Nexo Capital Inc. (“Nexo“) is a Cayman Islands company, which operates a cryptocurrency-backed lending platform, cryptocurrency exchange and wallets. In May 2019, Mr Shulev (co-founder of the Nexo group, and then a director of Nexo), opened an account on BitMEX (the “Account”) using his Nexo email address. Thousands of bitcoin were subsequently transferred into the Account from other Nexo accounts, and various futures contracts were traded on the Account. As at the judgment date, the total value of the Account was approximately £30 million. In September 2019, Mr Shulev’s appointment as a director was terminated and his access to the Account was withdrawn.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 as to the ownership of the assets held in the Account. Mr Shulev claimed that he had opened the Account in his personal capacity, and that some of the crypto-assets held there belonged to him. Nexo, however, argued that the Account was opened by Mr Shulev 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 held corporate assets.

In response to the competing claims, HDR froze the Account and in 2020 commenced stakeholder proceedings under CPR 86 against both Mr Shulev and Nexo.

Entitlement to the Account

On the day of the hearing of HDR’s stakeholder application, Mr Shulev and Nexo entered into a settlement agreement (the “Agreement“), which purported to resolve the question of ownership of the Account. However, almost immediately the parties fell into a further dispute over the Agreement, disagreeing as to whether it had been complied with, and what effect it had on the stakeholder proceedings.2 After discussing with the parties, the Court allowed HDR to exit the proceedings by ordering HDR to hold the balance on the Account as stakeholder and directing it to transfer the balance (after deducting its costs) to such address as the Court ordered. 

While His Honour Judge Henshaw ultimately determined that the question of entitlement to the Account and ownership of its contents had already properly been resolved by the Agreement, the judgment contains an interesting discussion as to how English law approaches these issues. 

Nexo’s central claim was that while it was not expressly or fully identified to HDR as the contracting party, it was still entitled to enforce the Account agreement against HDR as an undisclosed principal.3 Under English law, an undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority,4 provided that:

(i) in entering into the contract, the agent intends to act on the principal’s behalf, and 

(ii) the terms of the contract do not, expressly or impliedly, exclude the principal’s right to sue, and his liability to be sued. 

There was no suggestion by either Defendant that point (ii) applied here. HDR’s terms of service for the Account expressly envisaged the possibility that an individual might open and operate an account as agent for another entity. Similarly, neither party claimed that opening a crypto-trading account for Nexo on BitMEX was outside the scope of Mr Shulev’s actual authority as a director of Nexo. 

The main point in issue was factor (i), namely whether Mr Shulev intended to act on Nexo’s behalf when opening the Account, or whether he intended to act in his personal capacity. 

The High Court’s Decision

The High Court ultimately found that the Agreement was valid, and resolved who was entitled to the Account. However, it also held that (if it were wrong with respect 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 setting up the Account appeared to have been to enable Nexo to obtain a better rate than it was receiving on its other corporate accounts;

(b)    Deposits into the Account came from other existing Nexo corporate accounts;

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

(d)    Other employees at Nexo had access to the Account and executed transactions on it, whereas there was no evidence of Mr Shulev having executed any transactions on the Account; and

(e)    Various communications sent by Mr Shulev were expressed in terms (“we”) which suggested that he viewed the Account as a Nexo account rather than a personal account.5

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


With the English courts increasingly considering crypto-asset related disputes, this decision forms part of a developing body of English case law in this fast moving area.  It serves as a valuable reminder of the utility of stakeholder applications, including for cryptocurrency exchanges who may need to resolve disputes over account ownership where various competing claims to assets are made. 

1 [2022] EWHC 1685 (Comm).
2  These matters were also considered as part of the judgment, but are beyond the scope of this summary.
3 In the alternative, Nexo claimed as disclosed but not (fully) identified principal, on the basis that in using his Nexo corporate email address, Mr Shulev represented to HDR that he was opening the Account in his capacity as a director of Nexo. This secondary claim was not considered in the judgment. 
4 Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199, [207].
5  [2022] EWHC 1685 (Comm), [103].
6  [2022] EWHC 1685 (Comm), [111].
7  [2022] EWHC 1685 (Comm), [112].
8 See, for example, Tulip Trading Limited v Bitcoin Association for BSV [2022] EWHC 667 (Ch), our analysis of which is available here.

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