Moshe Hogeg, the founder behind the Ethereum-based prediction market platform Stox, has responded to a lawsuit filed on January 24 that alleges funds raised during the platform's ICO were invested in other ICOs instead of being channeled into the development of Stox as stated in the white paper. According to a report from The Times of Israel, Hogeg and his legal team are arguing the company's white paper is for descriptive purposes only and not meant to be taken as an officially binding document.
The Stox ICO launched in August 2017 and eventually raised about $33 million worth of Ether. The Chinese investor Zhewen Hu, who reportedly invested $3.8 million in the ICO, filed the lawsuit against Hogeg and Stox, claiming that only $5 million had been invested back into Stox while the rest was used to invest in the encrypted messaging app Telegram's ICO, along with others.
Hu's lawsuit argues that the ICO funds were misappropriated instead of being deployed as specified in the company's white paper. According to the white paper, should the ICO raise at least $30 million worth of Ether, which it did, 50 percent would be used to pay employees, 20 percent would be used for marketing, 15 percent would be spent on incentives and joint ventures opportunities, and the remaining 15 percent would be used on legal efforts, compliance, and miscellaneous expenditures.
Over the weekend, however, Hogeg responded to the lawsuit, claiming that not only was Hu misinformed about only $5 million being invested into Stox from its ICO, but that the company's white paper is of a "descriptive nature only and not binding." Because the white paper does not act as a prospectus given to the investors before the ICO, Hogeg and his legal team believe it "confers no legal responsibility on its issuers."
In addition to Hu's assertion that ICO funds were misappropriated, the lawsuit against Stox also alleges Hogeg devalued the Stox token (STX) of other investors by selling his share earlier than he claimed he would. To this, Hogeg argues that holders of STX signed a contribution terms document that states that token ownership does not constitute the following:
"[A]ny ownership right or stake, share, equity, security, commodity, bond, debt instrument or any other financial instrument carrying equivalent rights; any right to receive future revenues, shares or any other form of participation or governance right in or relating to STX and/or the STX Platform."
According to the report, Hogeg is hoping to move the adjudication venue from Israel to Gibraltar, where Stox is incorporated. Hu initially filed the lawsuit with the Tel Aviv District Court.
Hogeg is also the founder of Sirin Labs, creators of the FINNEY blockchain smartphone. And his lead role at Invest.com earned him a lawsuit in November from disgruntled shareholders, who argued that revenues from two ICOs were illegally appropriated for his personal use.