Nexo in Court With a Co-Founder Over $12M in Missing Assets

Troubled crypto trading platform Nexo is fighting in a U.K. court with a co-founder over $12 million in missing assets, CoinDesk learned from a court document recently shared with us. It sheds light on previously unknown details of interactions between Nexo’s founders.

According to the court judgment by the London’s High Court on June 27, Nexo and its co-founder Georgi Shulev are disputing the whereabouts of a Ledger hardware wallet containing some of the company’s crypto holdings. Shulev, who is a son of Bulgaria’s former deputy prime minister Lydia Shuleva, founded the company in 2019 together with Antoni Trenchev, who used to be a member of Bulgaria’s parliament, and other co-founders, Kosta Kantchev and Kalin Metodiev. Shulev left the company, which provides crypto trading, lending and custody services, in 2019. The legal dispute has been ongoing since 2022.

Earlier, the parties had been fighting for control over a BitMEX account that was opened by Shulev in his name but on behalf of Nexo, according to the filing. Since Shulev was terminated by Nexo in 2019, and lost access to his corporate email, he and Nexo have both been trying to take over the account.

BitMEX ended up freezing the funds but ultimately releasing them to Nexo after the court decision last August. However, Nexo said it lost around $7.9 million in value of its crypto as the prices declined significantly since September 2019, when the account was frozen.

Now, Nexo and Shulev are arguing about another part of the firm’s crypto treasury, which ended up either in Shulev’s hands or in the custody of Bulgaria’s law enforcement, depending on whose version of the story you believe.

According to the document, the wallet contained over $12 million in crypto, which is now missing.

Founders’ fight

Shulev and Nexo have been in conflict since September 2019, when Shulev was terminated in his role of Nexo’s managing partner by the board. Following this, Shulev tried to get compensation for his Nexo shares that were denied to him, according to reports. Access to Nexo’s crypto could have become a bargaining chip in those negotiations, the new court document shows.

In 2020, Shulev reportedly wrote an email to the asset management company Zeus Capital saying Nexo co-founder Kosta Kantchev had wrongfully denied Shulev shares in Nexo he had been promised. Shulev also accused his former employer of abusing its users’ trust, according to a reproduction of the email by the ranking firm BestBrokers. In a comment to the online publication Invezz, Nexo brushed off Shulev’s accusations.

As Nexo and Shulev had been fighting over the BitMEX account, they came to a settlement that Shulev should return assets belonging to Nexo in his custody and receive $1 million in exchange.

On 1 July 2021, according to the recent court filing, someone moved 45,232,012 in Nexo’s own tokens (NEXO) from the wallet Nexo claimed was controlled by Shulev to a new wallet, and Nexo received an email with the seed phrase for the new wallet from an address fill5645@protonmail.com.

Shulev did not confirm that it was him who sent the tokens but demanded the first of the five installments of the $1 million payment promised to him (the whole sum was slated to be paid over 30 months).

Nexo did not proceed with the payment, demanding Shulev return other crypto he owed it first, according to the document. Shulev insisted on getting his money first. The parties have been in a gridlock ever since.

Trenchev denied he meant to personally threaten Shulev

According to the document reviewed by CoinDesk, Shulev complained to the court that he was forced to sign the settlement agreement together with other documents needed for him and Nexo to part ways. He claimed that Nexo CEO Antoni Trenchev hurried him and even threatened him.

“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 wrote in an email to Shulev, according to his testimony.

Later, Trenchev called Shulev by phone and said, according to Shulev, that the Nexo team knew Shulev’s fiancée was pregnant and her business dealings had been under investigation (it’s not clear what exactly investigation was meant).

“You know who we are and that we have the money. You know how things are done in Bulgaria. Our patience is already over, so if you do not agree to sign the agreement I would not be very calm about your family and yourself,” Trenchev said during the phone call, according to Shulev’s testimony.

Trenchev disputed the wording of his remarks cited by Shulev and denied he meant to personally threaten Shulev, according to the court document.

Neither Trenchev nor Shulev responded to CoinDesk’s request for comment.

The missing Ledger

The dispute is full of confusing and contradictory claims.

Nexo told the court that Shulev retained access to a stash of 17.3 BTC, 27,000 USDT, 4.5 ETH and significant amounts of BNB, XRP and XML, the court document reads.

The assets, according to both sides of the case, were stored on a missing Ledger hardware wallet. Neither Shulev nor Nexo admit possessing the device.

In July 2021, Nexo suggested that Shulev deduct the $1 million settlement from the amount of crypto in his custody, and return the rest. In response, Shulev suggested sending “any residue assets” to an escrow agent, who would also receive the $1 million compensation owed from Nexo and then finish the exchange. However, after Nexo asked for specifics on this arrangement, Shulev went silent until March 2022, the court document said.

During the court hearings in April 2022, Shulev said he did not have access to those assets. Nexo pointed out that the NEXO tokens the firm received previously came from the same Ethereum blockchain address that contained some other tokens due to be returned: ETH, USDT, USDC and BNB. Then, Shulev denied it was him who sent the tokens.

CoinDesk located an address that fits the description of the wallet in question. It still contains around $217,800 worth of BNB.

“In a post-hearing note dated 13 June 2022, Mr Shulev took the same position: not denying that the Nexo Tokens were transferred, but denying that it was he who made the transfer,” the judge wrote.

According to Nexo, the company set up a Ledger wallet for its funds, which Shulev controlled and took with him as he left Nexo in 2019. Shulev maintains that he left the device in Nexo’s office and had no control over the funds.

In the meantime, other issues at Nexo complicated the case. In January, it became known that the company had been investigated by authorities in Bulgaria on suspicion of money laundering, tax offenses, banking without a license and computer fraud, CoinDesk reported earlier.

In testimony this April, Shulev told the court that after the Nexo office was searched, he was questioned by the Bulgarian National Investigation Service as a former employee. He said he volunteered to provide a PIN code for Nexo’s Ledger wallet to the investigators on March 21, 2023, and on March 31, seven of the nine cryptocurrencies stored on the device were transferred to newly created wallets.

Therefore, the crypto is now in the investigator’s custody and Shulev cannot transfer it to Nexo, he said. That story did not convince the judge, who wrote that Shulev was “clearly in control” of the assets in question and “was the party in breach of contract.”

The parties are now waiting for a trial.

Judgment Nexo v Shulev by Anna Baydakova on Scribd