In HDR v Shulev and Nexo, the Excessive Courtroom thought of the entitlement to a cryptocurrency buying and selling account, and the possession of its contents, as a part of stakeholder proceedings introduced underneath CPR 86 by the operator of a cryptocurrency change.1

Stakeholder Purposes

Stakeholder functions (made underneath CPR 86) are used as a method of figuring out entitlement to cash or items held by an entity that doesn’t itself have a declare to the cash or items. Amongst different issues, it permits a stakeholder to use to the courtroom for a course as to whom it ought to pay a debt or cash to, in circumstances the place competing claims are made, or are anticipated to be made, in respect of that debt or cash by two or extra individuals. Such proceedings are usually introduced by monetary establishments the place a number of claims are made for a sum of cash which they maintain. 

On this case, stakeholder proceedings had been commenced by HDR International Buying and selling Restricted (“HDR“), an organization integrated within the Republic of Seychelles, which operates BitMEX, a cryptocurrency-exchange platform, so as to resolve a dispute over the management and possession of the contents of a cryptocurrency buying and selling account opened within the identify of the First Defendant (“Mr Shulev“). 


The Second Defendant, Nexo Capital Inc. (“Nexo“) is a Cayman Islands firm, which operates a cryptocurrency-backed lending platform, cryptocurrency change and wallets. In Could 2019, Mr Shulev (co-founder of the Nexo group, after which a director of Nexo), opened an account on BitMEX (the “Account”) utilizing his Nexo electronic mail handle. Hundreds of bitcoin had been subsequently transferred into the Account from different Nexo accounts, and numerous futures contracts had been traded on the Account. As on the judgment date, the whole worth of the Account was roughly £30 million. In September 2019, Mr Shulev’s appointment as a director was terminated and his entry to the Account was withdrawn. 

A dispute then arose between Nexo and Mr Shulev as to the possession of the property held within the Account. Mr Shulev claimed that he had opened the Account in his private capability, and that a number of the crypto-assets held there belonged to him. Nexo, nonetheless, argued that the Account was opened by Mr Shulev solely in his capability as a director of Nexo; it was thought of by Nexo to be a company buying and selling account used for company functions, and it held company property.

In response to the competing claims, HDR froze the Account and in 2020 commenced stakeholder proceedings underneath CPR 86 in opposition to each Mr Shulev and Nexo.

Entitlement to the Account

On the day of the listening to of HDR’s stakeholder utility, Mr Shulev and Nexo entered right into a settlement settlement (the “Settlement“), which presupposed to resolve the query of possession of the Account. Nonetheless, nearly instantly the events fell into an extra dispute over the Settlement, disagreeing as as to if it had been complied with, and what impact it had on the stakeholder proceedings.2 After discussing with the events, the Courtroom allowed HDR to exit the proceedings by ordering HDR to carry the stability on the Account as stakeholder and directing it to switch the stability (after deducting its prices) to such handle because the Courtroom ordered. 

Whereas His Honour Choose Henshaw finally decided that the query of entitlement to the Account and possession of its contents had already correctly been resolved by the Settlement, the judgment accommodates an fascinating dialogue as to how English legislation approaches these points. 

Nexo’s central declare was that whereas it was not expressly or totally recognized to HDR because the contracting occasion, it was nonetheless entitled to implement the Account settlement in opposition to HDR as an undisclosed principal.3 Beneath English legislation, an undisclosed principal might sue and be sued on a contract made by an agent on his behalf, appearing throughout the scope of his precise authority,4 supplied that:

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

(ii) the phrases of the contract don’t, expressly or impliedly, exclude the principal’s proper to sue, and his legal responsibility to be sued. 

There was no suggestion by both Defendant that time (ii) utilized right here. HDR’s phrases of service for the Account expressly envisaged the chance that a person may open and function an account as agent for an additional entity. Equally, neither occasion claimed that opening a crypto-trading account for Nexo on BitMEX was outdoors the scope of Mr Shulev’s precise authority as a director of Nexo. 

The primary level in problem was issue (i), particularly whether or not Mr Shulev meant to behave on Nexo’s behalf when opening the Account, or whether or not he meant to behave in his private capability. 

The Excessive Courtroom’s Resolution

The Excessive Courtroom finally discovered that the Settlement was legitimate, and resolved who was entitled to the Account. Nonetheless, it additionally held that (if it had been incorrect with respect to the validity of the Settlement) Nexo would have been entitled to the Account and its contents. This conclusion was primarily based on quite a lot of key findings:

(a)    The aim of establishing the Account appeared to have been to allow Nexo to acquire a greater charge than it was receiving on its different company accounts;

(b)    Deposits into the Account got here from different current Nexo company accounts;

(c)    The Account was opened utilizing Mr Shulev’s Nexo company electronic mail handle, versus any private or non-public electronic mail handle;

(d)    Different workers at Nexo had entry to the Account and executed transactions on it, whereas there was no proof of Mr Shulev having executed any transactions on the Account; and

(e)    Numerous communications despatched by Mr Shulev had been expressed in phrases (“we”) which steered that he seen the Account as a Nexo account moderately than a private account.5

Total, HHJ Henshaw thought of that these components indicated that “whether or not judged objectively or subjectively, Mr Shulev meant to open the Account on Nexo’s behalf and to carry Nexo property”. As such, “in relation to the Account Mr Shulev owed, and owes, to Nexo the duties of an agent to his principal, together with the obligation to behave on Nexo’s directions and to carry the Account and its contents as fiduciary for Nexo.”7


With the English courts more and more contemplating crypto-asset associated disputes, this choice types a part of a growing physique of English case legislation on this fast-paced space.  It serves as a beneficial reminder of the utility of stakeholder functions, together with for cryptocurrency exchanges who might have to resolve disputes over account possession the place numerous competing claims to property are made. 

1 [2022] EWHC 1685 (Comm).
2  These issues had been additionally thought of as a part of the judgment, however are past the scope of this abstract.
3 Within the different, Nexo claimed as disclosed however not (totally) recognized principal, on the idea that in utilizing his Nexo company electronic mail handle, Mr Shulev represented to HDR that he was opening the Account in his capability as a director of Nexo. This secondary declare was not thought of within the judgment. 
4 Siu Yin Kwan v Japanese Insurance coverage 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 instance, Tulip Trading Limited v Bitcoin Association for BSV [2022] EWHC 667 (Ch), our analysis of which is available here.

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