In response to a lawsuit, Israeli crypto entrepreneur Moshe Hogeg has denied allegations of misappropriating investor funds, insisting that white paper claims are not legally binding.
In addition to being the CEO of Sirin Labs, Hogeg was behind the blockchain firm known as Stox (STX) on which the case is based. The news was reported by the Times of Israel on 9 February 2019.
In January, it was reported by media outlets that Stox was being sued for USD 4.6 million by Zhewen Hu, a Chinese investor. An investment of Ether (ETH) worth around USD 3.8 million was done by Hu in an open source platform, which was supposed to be a prediction market platform based on Ethereum.
It was predicted by Hu that the value of the native STX token would boost after the successful implementation of Stox’s prediction market platform, stated the lawsuit. Nevertheless, Hu believes that out of the total USD 34 million raised for the said platform, only USD 5 million were used for funding Stox, contrary to white paper plans.
Furthermore, Hu accused Hogeg of using the rest of the funds for investment in other initial coin offerings. He maintained that those funds were utilized in Telegram’s offering.
Responding to the lawsuit, Hogeg’s lawyers stated that a white paper is only used for describing the project, it is not supposed to be a legally binding document. Furthermore, Hogeg’s attorneys concluded with remarks that no obligatory program was presented in the document. Hence, it imposes no legal responsibility on the issuers.
Hogeg told the Times of Israel that he has not violated any law and lawsuit is just an “extortion attempt”, adding that the STX token is not a security. Therefore, no ownership rights in the company are granted.
He also believed that Israel is not the proper jurisdiction to proceed with the lawsuit as the company is Gibraltar-based.
According to reports, in the past few months, Hogeg has invested several million dollars in various startups. In late August, Hogeg purchased Israeli soccer club Beitar Jerusalem for USD 7.2 million. He also donated USD 1.9 million to establish the Hogeg Institute for Blockchain Applications at Tel Aviv University.
This is not the first scandal faced by Stox. Professional boxer Floyd Mayweather Jr was seen promoting Stox during its token offering. Floyd is facing charges from the US Securities and Exchange Commission for unlawful promotional activities related to startup Centra Tech’s sale. He has reportedly agreed to pay USD 300,000 as penalty along with USD 300,000 in disgorgement.
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