A Vancouver-based investor has accused Hogeg of major breaches of contract and alleged fraud that caused him losses of at least $430,000, according to a lawsuit filed Nov. 25. The complaint is filed with the United States District Court for the Western District of Washington.
Israeli crypto entrepreneur Moshe Hogeg and his blockchain firm Stox (STX) are facing a lawsuit from a disgruntled investor in the United States.
In the 43-page lawsuit, the plaintiff Sean Snyder claims that the company failed to perform its obligations under its whitepaper by issuing a larger amount of tokens than originally announced and eventually causing a significant loss in the value for its digital currency. Specifically, the defendants allegedly flooded the market with 16 million STX out of all 43 million STX in circulation, the plaintiff says.
According to Snyder, Hogeg and other involved defendants are responsible for defrauding global investors of “hundreds of millions of dollars.”
Founded by Hogeg, Stox is an open-source Ethereum (ETH)-based prediction market platform. Alongside Stox, Hogeg is involved in multiple crypto-related ventures as he founded major blockchain smartphone developer Sirin Labs and serves as chairman of blockchain network LeadCoin.
Hogeg allegedly used investor money to buy real estate and a soccer team
Among multiple accusations, the plaintiff also argued that Hogeg misappropriated investor money to make a number of expensive purchases. According to the lawsuit, those purchases included $19 million to buy land in Tel Aviv, $7 million for acquisition of Beitar Jerusalem, which is one of Israel’s top soccer clubs, as well as a $1.9 million donation to Tel Aviv University.
According to The Block, Snyder has put forward his claim himself and is not represented by legal counsel in this case.
Previous legal issues regarding misappropriated funds
In January 2019, a Chinese investor sued Hogeg and Stox for $4.6 million, alleging that the defendants misappropriated millions of dollars worth of crypto that had been invested in the firm. According to the lawsuit, only $5 million out of its $33 million initial coin offering (ICO) held in August 2017 were actually used to develop Stox’s product.
STX hit its all-time high of $2.60 with a market capitalization of around $4.2 million during the ICO in August 2017. Since then, the cryptocurrency has gradually fallen in waves to see a market cap of around $540,000 to date. At press time, STX is down 6.5% to trade at $0.01, according to Coin360.
Coinbase Secures Patent for System to Identify Non-Compliant Accounts
Major American cryptocurrency exchange Coinbase has been awarded a patent for a system that identifies and flags non-compliant accounts.
A filing with the United States Patent and Trademark Office on Nov. 19 details a system containing a scoring model that “determines a compliance score for each one of the accounts based on the respective factors associated with the respective account.” The system then compares the compliance score for each account to detect those accounts that fail compliance standards.
Eliminating non-compliant accounts
After a flagging unit identifies purportedly non-compliant accounts, the system assesses whether they are good or bad, enters the determination into a feedback system and decides whether or not to close the account. The filing stated:
“An investigator may be able to determine whether an account is being used for illicit activities by doing research on the parties of the transaction who receive or send payment and determining whether such parties are regularly involved in illicit activities. It may for example be relatively easy to determine that a party sending or receiving payment is in the business of conducting online services that may be illegal.”
According to CipherTrace’s report for the third quarter of 2019, the total volume of cryptocurrency-related fraud and theft resulted in losses worth $4.4 billion in 2019. CipherTrace delved into the 120 most popular cryptocurrency exchanges’ Know Your Customer (KYC) and Anti-Money Laundering compliance requirements and analyzed patterns in crypto-related crimes.
Earlier in November, a lawyer and general counsel at decentralized finance startup Compound Finance, Jake Chervinsky, raised the question of whether exposing the public to data risks that KYC requirements entail is worth it. He explained that KYC helps law enforcement to track illegal transactions, but also exposes the public to hacking, phishing and identity theft.