Moshe Hogeg, The Israeli founder of blockchain firm, Stox, has denied the charges of misappropriating investor funds in response to a lawsuit filed against him by Chinese investor, Zhewen Hu. His lawyers have said that the Stox white paper is of “a descriptive nature only and not binding” and that investors have no ownership rights in the cryptocurrency company they invest in.
Hu is suing Stox and its founder for $4.6 million after claiming to have invested $3.8 million worth of Ethereum on the basis of the company’s “promises and commitments” in its white paper. He believed that the native STX token value would be increased with the development of Stox’s prediction market platform, but claims that a mere $5 million of the $34 million raised actually went to fund Stox.
According to the lawsuit, the white paper claimed that if the company was able to raise $30 million worth of Ethereum, it would invest all of the money to develop its prediction market platform and make it successful, thereby increasing the value of Stox tokens in a secondary market. Hu has claimed that Hogeg sold his own tokens before he said he would, and by doing that, devalued the tokens of all other investors.
Lawsuit Against Stox Is An “Extortion Attempt”
However, according to Hogeg’s lawyers, a white paper does not constitute a prospectus or offering document. Hogeg himself said: “Ownership of tokens carries no rights whether express or implied other than a limited potential future right to use or interact with the Stox platform”. He also denies that only $5 million was invested, saying that the lawsuit was “an extortion attempt” that is damaging his image.
The company behind Stox, STX Technologies, is based in Gibraltar and Hogeg believes that Israel is not the proper jurisdiction to proceed with the case.
The Stox ICO raised $34 million and was promoted by boxer, Floyd Mayweather, who did not disclose that he had been paid to do so and was consequently fined by the US Securities and Exchange Commission.