Blockchain entrepreneur Moshe Hogeg, owner of Beitar Jerusalem, is involved in a legal dispute, amid mutual accusations, with 17 shareholders in AnyOption Holdings (AOH), a leading binary options company, which was acquired by Cypriot company IDC Investdotcom Holdings from the Singulariteam group, controlled by Hogeg.
Representing Hogeg, Adv. Mimi Zemah and Adv. Ehood Schneider said on Thursday, "Singulariteam yesterday filed suit in Cyprus against AOH and its shareholders for fraud, breach of an agreement, and threats, which today materialized, to petition an Israeli court for liquidation of Cypriot company IDC.
"In fact, the AOH shareholders defrauded Singulariteam through false and tendentious presentations, causing them to contract an agreement according to which, based on the presentation, the company has $7 million in cash, and to agree to merge activities and give percentages in the joint company. It later emerged that AOH had large debts that substantially exceed all of the capital that the company may have had."
For their part, the AOH shareholders petitioned the Tel Aviv District Court on Thursday for a liquidation order against IDC, which engages in offerings of virtual currency to the public. The petition alleges that Hogeg covertly removed assets worth tens of millions of dollars from the company, to the point of making it insolvent.
"Exploitation of courts in Israel"
In the framework of the petition, the shareholders make extremely serious allegations and accusations against Hogeg. Among other things, they claim that Hogeg stole, robbed, and looted money to which they were entitled under various agreements signed with a company under his control.
They allege that the information they discovered showed "that IDC was deceitfully managed; Hogeg, the controlling shareholder and driving force in IDC, is using the company's assets for his personal needs and deriving personal benefit from them; and the controlling shareholder loots and steals the company's assets and rights amounting to tens of millions of dollars." The shareholders also claim that IDC and Hogeg have acted with a lack of transparency, concealing information and documents. In view of this behavior, they say, they have a "real and concrete" concern that Hogeg is covertly removing IDC's assets, money, and rights and taking them for himself or giving them to strawmen on his behalf.
In the petition they filed through Adv. Ofer Furth, Adv. Lior Dagan, and Adv. Lior Liberman from the Furth-Wilensky-Mizrachi-Knaani law firm, the shareholders in AOK ask the court to appoint Dagan and Adv. Adi Figel as provisional liquidators for IDC, and to issue an order barring IDC or anyone on its behalf from making any disposition of the company's rights or assets.
In response to the liquidation petition, Hogeg states, "This petition for liquidation of a Cypriot company in Israel was designed solely for the purpose of exploiting the courts in Israel, which are not the appropriate forum for liquidating a Cypriot company, and merely for the purpose of exerting pressure and attempting to extort the shareholders in IDC and Hogeg to abandon their claims against the petitioners (the AOH shareholders, M.S.), and as part of an attempt to extract more money from them. It is no accident that the petition for liquidation of the Cypriot company in Israel was filed the day after the lawsuit was filed by Singulariteam in Cyprus, and it is no accident that they resorted to the Israeli media."
Associates of Hogeg say that the liquidation petition is a "means of applying pressure", a reaction by AOH to the lawsuit filed against them by Singulariteam in Cyprus, in which the latter raised claims of fraud, lies, and misrepresentation by the shareholders while they were reaching various understandings with Hogeg.
In any event, Hogeg's associates claim that the Israeli court is not entitled to liquidate a Cypriot company.
Merger in exchange for shares
AOH, founded in 2009, was a leading binary options company. Following the government decision to ban the marketing of binary options in Israel, the shareholders in AOH looked for a buyer for the company they owned. According to the liquidation petition, in June 2017, they contracted a merger agreement with IDC, a private company incorporated in Cyprus that conducts initial currency offerings (ICOs) to the public and operates through IDC Israel, its subsidiary in Israel.
Hogeg, the controlling shareholder in IDC, is the sole director of IDC Israel and a director of IDC. The petitioners assert that Hogeg "controls and directs the company's activity through a foreign fund (Singulariteam), whose offices are located in Israel."
The liquidation petition alleges that in the framework of the merger agreement (and a revised merger agreement signed by the parties in February 2018), the parties agreed that IDC would receive all of the shares, assets, and activity of AOH, which would be absorbed into the IDC group. This was in return for 35% of the shares, a $3.5 million payment from IDC's expected profits from expected future ICOs, and an additional payment of 465,000 tokens (virtual currency) of Stox Technologies (STX) worth millions of dollars more.
The petition also alleges that Hogeg personally undertook to immediately inject $3 million of his own money into IDC for its activity, plus tokens worth $6 million more, without diluting the petitioners as shareholders in IDC.
The petition further states that even before the merger agreement (both the original and revised agreements) was signed, an agreement was signed on June 15, 2017 between IDC and STX, then in the process of being founded and registered in Gibraltar, stating IDC was a founding partner of STX and was accordingly entitled, among other things, to 25% of the shares in STX.
"He did whatever he wanted with the company"
According to the liquidation petitioners, shortly after the original merger agreement in June 2017, they fulfilled their part of the bargain by transferring to IDC and Hogeg full control of AOH, including control of its activity, assets, rights, funds, employees, know-how, and goodwill. It is further alleged that IDC and Hogeg replaced the directors in AOH and IDC, and also drew a $500,000 loan from AOH.
The petitioners say that before the merger agreement with IDC, AOH had three million customers in its customer portfolio, owned licenses for its activity (binary options) in Europe and many other countries, had a cash balance, was entitled to money under the agreement for future revenue, had extensive marketing and financial infrastructure, had a highly trained professional sales team and trained and experienced employees, etc.
It is alleged that since the IDC merger agreement was signed, Hogeg carried out a number of ICOs through STX. As part of one of the ICOs, STX raised $34 million from the public, and the value of the issued currencies ballooned to $60 million shortly afterwards. According to the petitioners for liquidation, although the ICOs carried out relied on the know-how, goodwill, and employees of AOH in the presentations to investors in the ICOs, based on the employees, offices, accomplishments, and customers of AOH, Hogeg covertly transferred IDC's assets and rights to other corporations under his control, or to corporations under the control of strawmen on his behalf. It was also alleged that Hogeg "did, and is doing, whatever he wanted with IDC's money and property, while emptying the company of its assets."
"Theft and fraud"
The liquidation petition makes accusations against IDC's controlling shareholder - Hogeg. It claims that the petitioners learned after the ICOs that Hogeg had founded STX and registered 100% of it issued share capital in his name and under his ownership, even though the provisions of the merger agreement state clearly and explicitly that IDC was entitled to 25% of the shares in STX, among other things.
In other words, the petitioners are claiming that Hogeg stole and robbed IDC's shares in STX, which according to the results of the ICO should have generated $15 million for IDC. The petitioners add that all of the proceeds that IDC should received under the STX agreement following the allegedly successful ICO, i.e. $3 million and 25% of the unsold tokens, were not transferred, were not paid, and in effect were stolen from IDC by Hogeg through the use of fraud.
In the framework of the petition, the petitioners charge Hogeg with deceit and theft. They say that Hogeg "coveted and stole" the STX shares belonging to IDC, after having registered the IDC shares in his name and ownership, following the successful ICO by STX.
According to the petitioners, Hogeg concocted a fictitious purchase agreement through which he "bought" IDC's shares in STX for $3 million, while not bothering to pay IDC the fictitious proceeds of $3 million. Simultaneously with these acts, in addition to the alleged theft of IDC shares, the liquidation petition alleges that Hogeg added insult to injury by not transferring a $3 million payment and 25% of the unsold tokens in the ICO (another $8.9 million) to which IDC was entitled from STX, in violation of the merger agreement, the petitioners say.
The petitioners further allege that Hogeg is covertly transferring IDC's assets, activity, and rights to straw companies under his control or that of his relatives and associates. For example, it is alleged that Hogeg registered his private driver (who is also the husband of his personal assistant) as the owner of a company he founded), "through which Hogeg competes with IDC's business, takes personal advantage of IDC's business opportunities, and carries out 'round tripping' to promote his personal affairs."
The petition alleges that Hogeg is depriving the petitioners, 17 shareholders in AOH, who are entitled to be registered as owners of 35% of the shares in IDC, and has allegedly breached, and is breaching, in bad faith, his fiduciary duty as a director and his duties of fairness and goodwill as a controlling shareholder, while committing theft, fraud, and deceptive misrepresentation.
Bankruptcy, justice, and honesty
The AOH shareholders allege that there are two substantive grounds for liquidation. "The first is that the company is insolvent and unable to pay its regular and other debts and obligations. The second is the principle allowing liquidation of a company for reasons of justice and honesty.
The petitioners say that IDC is insolvent "after Hogeg emptied it of its assets, looted its property, and stole its rights for himself." They allege that IDC has debts to them and to AOH, debts to the company employees, some of whom have stopped working there, including IDC CEO Itai Avneri.
In a letter sent to Hogeg's legal representative a month ago, the petitioners state that IDC and Hogeg "confirmed and admitted" that IDC "is not profitable," because it cannot pay its monthly expenses from its own resources and is in need of external financing each month to pay salaries to its employees.
In this state of affairs, the petitioners claim, it is clear that IDC is insolvent, and grounds exist for its liquidation under the Companies Ordinance. For this reason, they believe that "There is no avoiding the need to appoint a provisional liquidator to closely supervise on behalf of the court… especially given the actions that were taken - covertly removing the company's rights or some of them to Mr. Hogeg and/or parties on his behalf, covertly removing and emptying the company of its assets, etc."
Moshe Hogeg (37) is a technology entrepreneur who is invested in several Israeli and overseas companies. He is the founder of the Singulariteam group and of the blockchain company Alignment. He is also the CEO of startup Sirin Labs and the owner of the Beitar Jerusalem football club.
Published by Globes, Israel business news - en.globes.co.il - on November 18, 2018
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