Nexo And Co-Founder Clash In Court Over Missing $12 Million In Crypto Assets

July 14, 2023 - Around 6 mins mins to read

Key Points:

Crypto trading platform Nexo and co-founder Georgi Shulev are engaged in a legal battle over the whereabouts of $12 million in missing assets, as revealed in a court document.
The dispute involves the ownership of a Ledger hardware wallet containing Nexo’s crypto holdings, with conflicting claims from both parties.
The legal conflict stems from Shulev’s termination in 2019 and subsequent claims for compensation, with accusations of breached trust and threats exchanged between Shulev and Nexo’s CEO.

In a recent court document, it has come to light that Nexo, a troubled cryptocurrency trading platform, is currently embroiled in a legal dispute with its co-founder, Georgi Shulev, over the whereabouts of $12 million worth of missing assets. The details revealed in the court judgment shed new light on the previously undisclosed interactions between Nexo’s founders, CoinDesk first reported the event.

Nexo And Co-Founder Clash In Court Over Missing $12 Million In Crypto Assets

According to the document issued by the High Court of London on June 27, Nexo and Georgi Shulev are contesting the ownership of a Ledger hardware wallet, which supposedly contains a portion of the company’s cryptocurrency holdings. Shulev, the son of former Bulgarian deputy prime minister Lydia Shuleva, co-founded Nexo in 2019 alongside Antoni Trenchev, a former member of Bulgaria’s parliament, as well as Kosta Kantchev and Kalin Metodiev. Shulev left the company in 2019, which offers crypto trading, lending, and custody services. The legal dispute has been ongoing since 2022.

Previously, the parties were locked in a battle for control over a BitMEX account, initially opened by Shulev in his name but on behalf of the company. Since Shulev’s termination in 2019 and subsequent loss of access to his corporate email, both Shulev and Nexo have been vying for control of the account.

After a court ruling in August of the previous year, BitMEX froze the funds and eventually released them to the company. However, due to the significant decline in cryptocurrency prices since September 2019, when the account was frozen, Nexo suffered a loss of approximately $7.9 million in the value of its crypto assets.

Presently, the company and Shulev are entangled in a dispute over another portion of the company’s crypto holdings, which has ended up either in Shulev’s possession or in the custody of Bulgarian law enforcement, depending on whose version of events is believed. The court document reveals that the missing wallet contained over $12 million worth of cryptocurrency.

The conflict between Shulev and Nexo dates back to September 2019, when Shulev was terminated from his role as the company’s managing partner by the board. Following his termination, Shulev reportedly sought compensation for his denied Nexo shares. The court document suggests that access to the company’s crypto assets may have become a bargaining chip in these negotiations.

In 2020, Shulev allegedly sent an email to asset management company Zeus Capital, claiming that Nexo co-founder Kosta Kantchev had wrongfully denied him the shares he had been promised. Shulev also accused his former employer of breaching users’ trust. The company dismissed Shulev’s accusations in a comment to online publication Invezz.

After a settlement was reached between Nexo and Shulev regarding the BitMEX account, which required Shulev to return the company’s assets in his possession and receive a $1 million payment, a new development unfolded. On July 1, 2021, someone transferred 45,232,012 of the company’s own tokens (NEXO) from the wallet claimed to be controlled by Shulev to a new wallet. Nexo received an email with the seed phrase for the new wallet from an address believed to be fill5645@protonmail.com.

While Shulev did not confirm his involvement in the token transfer, he demanded the first installment of the $1 million payment promised to him. Nexo, however, refused to proceed with the payment, demanding that Shulev return other owed crypto assets first. Shulev insisted on receiving his money before returning any assets, resulting in an ongoing deadlock between the two parties.

Shulev complained to the court that he was coerced into signing the settlement agreement and other related documents when parting ways with the company. He claimed that Nexo CEO Antoni Trenchev rushed him and even threatened him during the process.

The judge quoted an email allegedly sent by Trenchev to Shulev, saying:

“Don’t worry about us – we will be fine. However, I’m not so sure about you, the people around you, and any startups, which are about to potentially take off.”

Trenchev reportedly made a phone call to Shulev afterward, where Shulev claims Trenchev mentioned that they knew about Shulev’s pregnant fiancée and her business dealings being under investigation, without specifying the nature of the investigation. Trenchev allegedly warned Shulev about potential consequences for him and his family.

The dispute between Nexo and Shulev is rife with conflicting claims and confusing narratives. The company asserted in court that Shulev still retained access to a stash of 17.3 BTC, 27,000 USDT, 4.5 ETH, as well as substantial amounts of BNB, XRP, and XML. However, neither Shulev nor Nexo admits to possessing the missing Ledger hardware wallet.

In July 2021, Nexo proposed that Shulev deduct the $1 million settlement from the crypto assets in his possession and return the remainder. In response, Shulev suggested involving an escrow agent to receive any residual assets and oversee the payment of the $1 million owed by Nexo. However, after Nexo requested more details regarding this arrangement, Shulev ceased communication until March 2022.

During the April 2022 court hearings, Shulev claimed that he did not have access to the assets in question. Nexo countered by pointing out that the NEXO tokens they previously received came from the same Ethereum blockchain address that contained other tokens due to be returned, including ETH, USDT, USDC, and BNB. Shulev denied being responsible for the token transfer. The address matches the description of the disputed wallet, which still holds approximately $217,800 worth of BNB.

The judge wrote in their ruling that Shulev’s claims were not convincing, stating that he was “clearly in control” of the assets in question and had breached the contract.

Complicating matters further, other issues within Nexo have come to light during the course of this case. Earlier this year, it was revealed that the company was under investigation by Bulgarian authorities for suspected money laundering, tax offenses, operating without a license, and computer fraud.

Shulev testified that after the Nexo office was searched, he was questioned by the Bulgarian National Investigation Service as a former employee. He claimed to have voluntarily provided a PIN code for Nexo’s Ledger wallet to investigators on March 21, 2023. On March 31, seven out of the nine cryptocurrencies stored on the device were allegedly transferred to newly created wallets. Shulev stated that the crypto assets are now in the custody of the investigators and cannot be transferred to Nexo. However, the judge found Shulev’s account unconvincing, ruling that he was the party in breach of the contract and was clearly in control of the assets in question.

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