The chairman of tech company Zyber (ASX:ZYB) is on the hook for $200,000 plus costs after a months-long battle by two shareholders to get their money back.

Last week Justin Puddick and his father John won a NSW Supreme Court judgement to retrieve $100,000 they each gave to Zyber chairman George Hatzipapas to invest in a pre-IPO fund raise.

The court instructed Hatzipapas and his company Dyamond Developments to return the money to the men.

A Hot Copper deal

Zyber listed in 2016 purporting to be building highly-secure file sharing software, but little progress has been made in the intervening years.

The company’s shares surged by over 40 per cent in late 2017 on the back of speculation it was getting into blockchain, and promptly sank in late January 2018 when it went through another board reshuffle.

Justin Puddick started investing in Zyber shortly after its IPO as he was keen to put money into a cyber security venture, becoming a top 20 shareholder with a total 6.83 per cent stake.

But the deal at the heart of the lawsuit began on investor gossip forum Hot Copper.

Hatzipapas approached Puddick via private message on Hot Copper in September 2017 and the talks continued over the next few months “in which Justin came to believe that George was influential in the management of Zyber”, the judgement said.

“Justin attributed the increase in the value of his Zyber shares from 0.4 cents at the time of their purchase to 4.6 cents on 19 January 2018 to the work done by George” rather than the hype around crypto currencies at the time.

Zyber shares have been suspended since November 2018 pending a response to a price query from the ASX.

In January 2018, Hatzipapas asked Puddick whether he wanted to join a $1m pre-IPO raise for Canberra-based Gravity Consulting. Puddick alleged to the court Hatzipapas said the company was a “subsidiary of Microsoft”, a claim Stockhead could not verify.

“The deal is going to be a 10-bagger and there is no way you can lose money on it. Are you interested?” Puddick alleges Hatzipapas said in January 2018.

“I am with Bill Ottis [sic] and Geoff Gander and we are wining and dining the board of Gravity Consulting. They love me. I am only getting a small group of guys I can trust to invest in Gravity. The minimum investment is $100,000 and it needs to happen today.”

Puddick and his father each put $100,000 into the bank account of Dyamond Developments, a company controlled by Hatzipapas and his wife Argiroula.

Gravity Consulting did not respond to two requests for comment on any IPO plans.

Its only ties to Microsoft appear to be a partnership in the tech giant’s co-seller program.

‘My patience has run out’

But nothing went to plan.

By March, it appeared the pre-IPO round was off. Puddick and his father began asking when their money would be returned.

By May, the money still hadn’t been returned and in a Whatsapp message Puddick said:

“George, I need a firm date as to when my dad and I will be paid in full. If I don’t get one from you I’ll have no choice but to consider my options. This is our money not yours. You have no right to decide when we get our money back. My patience has run out.”

But Hatzipapas had already used the cash to buy shares in Zyber and Pacifico Minerals (ASX:PMY).

The day after Puddick’s veiled threat, Hatzipapas transferred the Pacifico shares from Dyamond into another company he controlled with his wife called Gaks.

Hatzipapas claimed the Puddicks agreed to allow their money to be used “for investments with Zyber and related companies until the Gravity deal comes through”, and later for other opportunities.

These opportunities were generated by “being a sophisticated investor I get a lot more opportunity than Justin would get or anyone else in this room I guess, if they are not sophisticated investors.”

But the judge was having none of it.

“George caused Dyamond to invest the money in the purchase of shares in companies already listed on the ASX, which did not in any way involve him using connections that were not available to Justin and John,” the judgement said.

Furthermore, the judge said that if Puddick had been happy for Hatzipapas to buy shares for him in Pacifico, as per Hatzipapas’ evidence, his money was used to buy Zyber shares on market — not Pacifico stock — which he could have done himself without needing access to a sophisticated investor.