Cryptocurrency exchanges have had their fair share of controversies in the past months, and the latest platform, tog et hit by one is BitMex. Being one of the largest and more popular exchanges on the planet, the company, as well as its founder, Arthur Hayes, have been subjects of scrutiny multiple times. This time around, BitMex and Hayes were sued for $300 million by one of its initial investors, Frank Amato and RGB Coin Ltd.
Amato revealed that he was one of the first believers of BitMex and had given seed money for its conception in 2015. The total investment of $30,000 was then supposed to be converted to equity within BitMex, a process that would place the value of the stocks at $50 million today. Amato and his partners added that Hayes did not provide any equity and gave out only false information to them. The filing submitted by Amato in the Superior Court of the State of California in San Francisco stated:
“Through this action, Plaintiffs seek damages representing the value of their equity interest in BitMEX, which is conservatively estimated to exceed $50,000,000, together with punitive damages of $250,000,000. Plaintiffs also seek injunctive relief and other remedies, together with their attorneys’ fees and costs.”
According to the case file, Hayes had repeatedly pitched Amato to invest in BitMex’s nascent and struggling cryptocurrency exchange platform. The cryptocurrency exchange needed the money to pay engineers, procure equipment, develop the necessary algorithms, and to help promote the platform.
The claims made by the plaintiff also addressed concerns about how BitMex was not able to raise money through traditional methods and was at risk of failing. The suit filed by Amato talked about how the defendants mislead the plaintiff, a move that came right after a $30,000 investment at a $600,000 valuation. This investment was made from SOSV, a startup accelerator, and a multi-stage venture capital investor with offices in San Francisco.
The latest lawsuit comes a month after BitMex witnessed a significant data leak within their system. The event caused several email addresses of users being sent across servers en masse. Viven Khoo, BitMex’s deputy chief operating officer, had then said:
“We are deeply sorry for the concern this has caused to our users. The issue was caused by an error in the software used to send emails. As soon as we were made aware of the issue, we immediately prevented further emails from being sent and have since addressed the issue to ensure this does not happen again.”
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