Elad Arad, the former partner of brothers Uriel and Daniel Peled in CoinTree Capital, is suing the two of them and Israeli blockchain company Orbs, which was behind one of the largest ICOs (initial coin offering) of last year, according to a statement of claim that has reached "Globes". Arad claims, among other things, that the two brothers dispossessed him of his share in the joint company.
The claim was filed in the Tel Aviv District Court after a prolonged mediation procedure lasting about eighteen months that ended without agreement between the two sides. In the statement of claim, filed last Thursday, Arad claims that the Peled brothers practiced against him "conspiracy, deceit and serious fraud, as well as unjust enrichment." Besides the brothers and Orbs, of which they were among the founders, Arad is also suing four other companies in which the brothers are partners: Cointree Management, Microverse, Hexa Labs, and Hexa Solutions.
The statement of claim states that the amount of the claim "cannot be estimated until accounts are forthcoming". Market sources estimate, however, that it will be in the tens of millions of dollars. The claim includes breach of fiduciary duty, oppression of a minority shareholder, breach of contract and breach of commitments, theft of commercial secrets, negligence, and unjust enrichment.
According to the claimant, "The respondents (the Peled brothers) exploited Cointree Capital's business opportunities to set up new companies based upon new opportunities in the new world of virtual currencies, as well as ideas and plans of Cointree Capital. In effect, the respondents deprived the claimant of his share in the new companies, left him behind, and emptied Cointree Capital of content by taking its business opportunities and competing with it in the new companies, and even emptied it of its tangible assets, its cash and its manpower, and made use of the reputation it had acquired."
The transactions mentioned in the statement of claim are connected to some of the largest recent financing rounds in cryptocurrencies. Canadian company Kik, for example, which has a development center in Tel Aviv, raised $100 million in an ICO in September 2017 in which digital currency Kin was issued. Two months ago the US Securities and Exchange Commission sued Kik in New York claiming that its ICO was in effect a sale of securities without a license.
Another company mentioned in the context of transactions connected to the Peled brothers is Sirin Labs, founded and managed by Moshe Hogeg, owner of the Beitar Jerusalem football club. Sirin Labs raised $158 million in its ICO (SRN) in December 2017, the largest ever so far by an Israeli blockchain company.
Orbs, founded in 2017, has so far raised $133 million in two main funding rounds: in May 2018, it raised $118 million in an ICO in which it issued the digital currency Orbs, and in December 2018 it raised over $15 million from South Korean venture capital firm Kakao Investment. The public blockchain infrastructure developed by Orbs rests on an older network, Ethereum, the second largest blockchain network after Bitcoin.
Orbs has four founding partners: the Peled brothers, CEO Tal Kol, and Netta Korin. Michal Simler is general manager of the company. It employs over 60 people at its offices in Tel Aviv, San Francisco, Singapore, and Seoul. Hexa Foundation, a non-profit organization set up to use blockchain for social purposes, operates as part of the Orbs group.
Orbs stated yesterday in response to the lawsuit: "We have not yet managed to study the claim documents, which were sent to us at the same time as they were distributed to the press and media. Unfortunately, the statement of claim did not surprise us, and follows previous attempts and threats on the part of the claimant. The claimant's claims are completely unfounded and are devoid of any factual or legal basis, and their entire aim is to lead to the unlawful enrichment of the claimant at others' expense. This attempt will not succeed. The claimant does not have and never had any cause of action against the company and the other respondents. The company will not submit to the claimant's threats, and since he has chosen to resort to legal channels, the company has all the arguments and evidence necessary to refute his version of events, and these will be brought before the court in due course."
Published by Globes, Israel business news - en.globes.co.il - on August 5, 2019
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