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Early Investors Hit Crypto Exchange BitMEX With $540 Million Lawsuit

Early Investors Hit Crypto Exchange BitMEX With $540 Million Lawsuit

One of the largest crypto derivatives exchanges in the world, and its founder Arthur Hayes, was recently served a lawsuit from the firm’s early investors who want to recoup the value of their equity alongside punitive damages.

The lawsuit comes from purported early investors

Some self-proclaimed early investors in their cryptocurrency exchanges platform filed an amended lawsuit against the firm, asking for the full value of their equity alongside punitive damages. The plaintiffs are Frank Amato and RGB Coin Ltd. Elfio Guido Capone also joined the lawsuit and is now demanding $540 million from the exchange. Both claim to be the first seed investors in the firm in 2015 and said that they invested $55,000 in the firm for which they were promised equity of $10 million at post-money valuation.

Early Investors Hit Crypto Exchange BitMEX With $540 Million Lawsuit

The three parties now collectively seek to recoup the current value of their equity which is expected to cross $90 million. They are also seeking $450 million in punitive damages from the firm.

What happened during the seed funding?

According to the lawsuit, the trio was approached by Hayes on LinkedIn. At the time, BitMEX was a novel idea that lacked any traffic, funding, or backing. Amato, a former commodity derivatives trader, who previously worked for JP Morgan Chase & Co., says that Hayes sought angel investment since mid-2014. In the beginning, they were looking for “equity investors.”

Amato was allegedly promised that an investment in the firm will buy him equity in BitMEX worth $50,000 and he will have the same rights as the other two founders of the company. He was also told that he would be notified immediately when additional financing plans are undertaken so that he could retain his stake.

The legal document states,

“Defendants representations and repeated assurances that Mr. Amato’s investment would entitle him to equity in BitMEX were either knowingly false or were recklessly made to induce Mr. Amato to invest money that Defendants never intended to allow to become equity in the business. In reliance on Defendants’ representations, Mr. Amato executed the SAFE and then, on June 26, 2015, wired Defendants $30,000.”

Capone, who joined the lawsuit later, invested in the firm after a Skype call. He said that he was given false information by the founder. He was told that he would receive a 10% stake in the company while three other founders retain 90% equity.

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      Sherlock Gomes loves to write and express his views on anything related to Crypto. He has been covering Crypto for more than two years now. He likes Bitcoin and Cardano. He also writes on Finance, Healthcare, and Technology among other stuff. He can be reached by e-mail on sherlockg@insidebitcoins.com