Offshore cryptocurrency exchange gets clarity from English high court on ownership and control of trading accounts | White & Case LLP

Offshore cryptocurrency exchange gets clarity from English high court on ownership and control of trading accounts |  White & Case LLP

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

Stakeholder applications

Stakeholder claims (made under CPR 86) are used as a way of determining a right to money or goods held by an entity that does not itself have a right to the money or goods. Among other things, it allows a party to apply to the court for a direction to whom a debt or money should be paid, in circumstances where there are or are expected to be conflicting claims in relation to that debt or money by two or more persons. Such procedures are usually initiated by financial institutions where multiple claims are made for the amount of money they hold.

In this case, the stakeholder proceedings were initiated by HDR Global Trading Limited (“HDR“), a company incorporated in the Republic of Seychelles, which operates BitMEX, a cryptocurrency exchange platform, 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 Nexo Group and then director of Nexo) opened an account on BitMEX (“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 date of the judgment, the total value of the Account was approximately £30 million. In September 2019, Mr Shulev was appointed director and his access to the Account was revoked.

Then there was a dispute between Nex and Mr. Shulev regarding 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 belong to him. Nexo, however, claimed that the account was opened by Mr. Shulev solely in his capacity as a director of Nexo; Nexo considered it a corporate trading account used for corporate purposes and held corporate assets.

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

Right to account

On the hearing date of HDR’s stakeholder application, Mr. Shulev and Nexo entered into a settlement agreement (“Agreement“), which was supposed to resolve the question of ownership of the Account. However, almost immediately the parties fell into further dispute over the Agreement, disagreeing on whether it had been complied with and what effect it had on the stakeholders’ actions.2 After discussions with the parties, the Court allowed HDR to exit the proceedings by ordering HDR to retain the balance in the account as a stakeholder and directing it to transfer the balance (after deducting its costs) to an address specified by the Court.

While His Honor Judge Henshaw ultimately found that the issue of rights to the account and ownership of its content was already properly settled by the Treaty, the judgment contains an interesting discussion of how English law approaches these issues.

Nex’s central contention was that, although it was not specifically or fully identified to HDR as a party to the contract, it nevertheless had standing to enforce the account agreement against HDR as an undisclosed principal.3 Under English law, an undisclosed principal may sue and be sued for a contract entered into by an agent on his behalf, acting within his actual authority,4 under condition:

(i) when concluding the contract, the agent intends to act on behalf of the principal, i

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

None of the defendants suggested that point (ii) applied here. HDR’s Terms of Service for the Account expressly provided for the possibility that an individual may open and operate an Account as an agent for another entity. Similarly, neither party argued that the opening of a crypto-trading account for Nexo on BitMEX was beyond the scope of Mr. Shulev’s actual authority as a director of Nexo.

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

Decision of the High Court

In the end, the High Court found that the Agreement was valid and decided who was entitled to the account. However, he also held that Nexo would have been entitled to the Account and its contents (had he been wrong about the validity of the Agreement). This conclusion was based on several key findings:

(a) The purpose of opening the Account appears to have been to enable Nex to get a better rate than it was getting on its other corporate accounts;

(b) Deposits to the Account come from other existing Nexo corporate accounts;

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

(d) Other Nex employees had access to the Account and made transactions on it, while there was no evidence that Mr. Shulev made any transactions on the Account; and

(e) Various communications sent by Mr. Shulev were couched 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 assessed objectively or subjectively, Mr Shulev intended to open an account in Nexo’s name and hold Nexo assets”.6 As such, “with respect to the account, Mr. Shulev owed, and owes, 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 a fiduciary for Nexo.”7


As English courts increasingly consider disputes related to crypto-assets, this decision forms part of the development of English case law in this rapidly developing field. It serves as a valuable reminder of the utility of applications for interested parties, including for cryptocurrency exchanges that may need to resolve account ownership disputes where various competing claims to assets are made.

1 [2022] EWHC 1685 (Comm).
2 These issues were also considered as part of the judgment but are beyond the scope of this summary.
3 Alternatively, Nexo argued that it was a disclosed but not (fully) identified principal, on the basis that, using his Nexo corporate email address, Mr Shulev stated to HDR that he was opening the Account in his capacity as a director of Nexo. This secondary request 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), of which our analysis is available here.

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