Court papers show blockchain play Shivom is the source of DigitalX lawsuit
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Healthcare blockchain play Shivom is at the centre of a consumer protection lawsuit filed against DigitalX, Stockhead can reveal.
ICO advisor and blockchain consultant DigitalX (ASX:DCC) told investors on Friday it was being sued by a consortium of eight parties for $2.5 million for misleading or deceptive conduct under consumer protection law.
DigitalX immediately hit back, announcing to the ASX that it denied any wrongdoing and would vigorously defend the claim.
An ICO is like an initial public offering — but instead of offering shares, an issuer sells digital tokens that can be traded on cryptocurrency platforms or swapped for services.
DigitalX advised “more than 10” ICO projects last year, bringing in $8.1 million revenue according to its annual report.
Until now it was not known which of the ICOs was the subject of the claim.
But the Statement of Claim filed by the eight applicants with the Western Australian registry of the Federal Court — obtained by Stockhead — reveals it was Shivom.
Shivom, launched last October in northern India, has the ambitious plan of “growing to be the largest genomic and health data-hub on the planet“.
On a visit to Australia in March, co-founder Axel Schumacher told the AFR he wanted to raise $US45 million in an ICO “pre-sale” and an additional $30 million in a public sale of its “OMX” digital tokens.
Under the federal court claim, the parties claim they brought significant amounts of OMX tokens under false pretences.
Collectively they purchased 11.6 million OMX tokens for 1,610 Ethereum, which had a value of $2.5 million when purchased, it is alleged.
DigitalX acted as corporate advisor to Shivom, providing the company technical expertise, marketing and promotion services and introductions to its network.
The court papers allege that in discussions leading up to the ICO, DigitalX made several representations to the applicants, including that the OMX tokens that they had purchased would be the only OMX tokens available to be traded during a two-month restricted trading period after the initial trading day.
It is alleged that Leigh Travers, chief of DigitalX, had several telephone conversations with some of the applicants, saying that there would be a high demand for their OMX tokens after the initial trading date.
It is also alleged that the from the initial trading day, OMX tokens other than the ones purchased by the applicants were listed for trading, meaning there was a decline in the market price of the applicants’ tokens.
The applicants allege that DigitalX’s representations “were false and misleading” and are seeking DigitalX “repurchase the DCC private sale OMX tokens from each applicant at the cost incurred by each applicant in their acquisitions” as well as damages under section 236 of Australian Consumer Law.
The Statement of Claim alleges that DigitalX was “under a duty to provide accurate advice about the terms of the ICO by Shivom, required to act as a competent financial advisor and required to correct any incorrect information of which it was aware or had reason to believe the applicants had received about the ICO”.
In DigitalX’s alleged failure to do so, the applicants’ argue the company “made representations which were incorrect”.
DigitalX advised “more than 10” ICO projects last year, bringing in $8.1 million revenue for the group according to its annual report.
DigitalX told investors in an announcement released to the ASX on Friday that a group of parties had served a claim in the Federal Court of Australia.
The filing — which claims misleading or deceptive conduct under consumer protection law — was brought by eight different parties.
They are The Gas Super Fund, Carjay Investments, Blue Island Nominees, Bob Alfred Pty Ltd, Kassite Limited, Prosperity Ridge Holdings, Technique Capital and Jon Biesse and Esther Joy Biesse.
Jon and Esther Biesse have had a shareholding in DigitalX since the company was known as Digital CC.
Initial coin offering advisory
Companies for which DigitalX have played an advisory role in ICOs have included Shivom, Bankorus, INS Ecosystem, CoinPoker, SingularityNET, BitCar, Power Ledger and Bankera.
In a statement to the ASX, DigitalX said it was confident it would successfully defend the case.
“While the company and its legal advisors continue to review and examine the claims made, the company denies any claim of wrongdoing,” it said.
“For reasons that will become apparent as the matter progresses, DigitalX believes it has strong grounds to defend any claims bought forward by these applicants.
“As such, the company intends to vigorously defend this matter and protect its reputation.”
The case will be first heard in an initial case management hearingby Justice Neil McKerracher on October 18.
Stockhead is seeking comment from DigitalX.
If you know more about this ICO or others like it, contact reporter Dan Paproth at [email protected]