Arbitrade co-founder Troy Hogg sues for millions
Arbitrade co-founder Troy Hogg has filed a complaint in the Supreme Court of the State of New York against 13 defendants seeking damages in the tens of millions of dollars.
Joining Ontario resident Mr Hogg as plaintiffs in the wide-ranging action are Leila Holdings Ltd, which is incorporated in Ontario and of which Mr Hogg is the sole shareholder and director, derivatively on behalf of Bermudian-registered Arbitrade Ltd, of which Leila Holdings owns 67 per cent of the shares.
Seven individual defendants are named, as are Delaware limited liability corporations Dignity Holdings, Dignity Mining Group and Dignity Gold, Utah-based Scotia International of Nevada Inc, United Arab Emirates corporation Sion Trading FZE, and Puerto Rico-based Coinmint LLC.
Arbitrade Ltd is included as a nominal defendant.
The individual defendants include California resident Stephen Lance Braverman, a former chief operating officer of Arbitrade.
The causes of action include breach of contract, unjust enrichment, conversion, unconscionability, and aiding and abetting conversion.
The plaintiffs seek the rescission of certain contracts entered into between the parties.
A 17-page complaint sets out the plaintiffs’ case.
It is summarised as “an action to recover for tens of millions of dollars and/or equitable relief for a series of transactions by which defendants mulcted tens of millions of dollars from plaintiff Troy Hogg and his interests”.
Before incorporating Arbitrade Ltd in Bermuda in May 2018, Mr Hogg created the crypto currency company Cryptobontix Inc, of which he was the sole shareholder.
Cryptobontix issued a family of digital asset tokens, including a token called “Dignity”, which were designed to be backed by precious metals. Proceeds from the sales of Dignity tokens were used to fund Arbitrade.
The complaint says Arbitrade also intended to issue additional crypto currency backed by precious metal – and, to enable it to do so, Cryptobontix acquired a number of “mining rigs”, the hardware elements capable of performing crypto currency mining.
In July 2018, the complaint alleges, Arbitrade engaged defendants Sion Trading and Max Barber to secure gold by which to back Arbitrade’s crypto currency.
The plaintiffs say Mr Barber purported to secure $10 billion in gold bullion, and Sion and Arbitrade entered into an agreement under which Sion purported to assign its rights to that gold.
The complaint claims that Arbitrade agreed to pay Sion $1 million per month – and, later, $1.6 million per month – for the rights to the gold.
The complaint alleges that Mr Barber directed Arbitrade to make the payments to defendant Scotia International of Nevada, of which Mr Barber was the acting president.
It adds: “Upon information and belief, however, Barber did not actually secure the gold bullion.”
In total, the complaint says, Arbitrade paid Sion/Mr Barber $7.7 million.
The complaint claims that to further back its tokens, Arbitrade paid a non-party $4.5 million towards the purchase of gold casts of the late South African president Nelson Mandela’s hands.
But it alleges that Mr Barber in March 2019 “misappropriated the hands, falsely claiming that he was entitled to them as collateral against supposed debts owed to him by Arbitrade”.
The complaint adds: “Upon information and belief, the hands are worth at least $45 million.”
The suit claims that beginning in the fall of 2018, Mr Hogg, defendant Ricky Sanders and non-party Greg Daniel sought to establish and operate a bank in Bermuda.
The complaint alleges that Mr Hogg wired $250,000 to Mr Sanders to pay the Bermuda Monetary Authority’s “requisite licensing fee”.
However, the suit says, Mr Sanders “instead kept the money for himself”.
The complaint alleges that Mr Barber and Sion “employed economic duress to force Hogg to sell to them Cryptobontix and all of its assets at a grossly unfair price”.
That price, $1 million, was “a fraction of their worth”, the complaint says.
The details of that transaction, and its complicated aftermath, are alleged by the plaintiffs to involve several of the defendants, including Mr Braverman.
The complaint adds: “Upon information and belief, the rigs have produced at least between $30-46 million since the illegal transfer to Barber, Braverman and Swig (via Dignity Holdings) -- money that properly belongs to Hogg and/or Arbitrade.”
The suit claims that Mr Hogg and Leila Holdings last November made demand upon the Arbitrade board to bring the claims asserted in the complaint – but the board declined.
Utah resident Mr Barber, Sion and Scotia International have filed a notice of motion to dismiss the complaint “for lack of personal jurisdiction”.
That matter was to have been heard Monday, but has been adjourned by agreement of the parties to a return date of October 10.
None of the allegations in the complaint have been proven in court.