Cryptocurrency consultant DigitalX is the target of a $US1.8 million ($2.5 million) lawsuit brought by investors in an initial coin offering for which it acted as an advisor.
An ICO is like an initial public offering — but instead of offering shares, an issuer offers 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 for the group according to its annual report. It’s not known which ICO the lawsuit involves.
DigitalX (ASX:DCC) told investors in an announcement released to the ASX on Monday 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 six different parties.
They are The Gas Super Fund, Carjay Investments, Blue Island Nominees, Bob Alfred Pty Ltd, Kassite Limited, 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 by Justice Neil McKerracher on October 18.
DigitalX’s annual report revealed the company had US$5.8 million cash in the bank at the end of the 2018 financial year.
It reported a US$2.4m profit, improving from 2017’s US$3.9m loss and said revenue from operations came in at US$8.2m.
Stockhead is seeking comment from Lavan, the law firm representing the applicants, and DigitalX.