Former Partner Sues Israeli Blockchain Firm for Breach of Contract

An Israeli ICO company is facing a multi-million dollar lawsuit following a founding partner's ejection from the firm.

AccessTimeIconAug 5, 2019 at 9:00 p.m. UTC
Updated Sep 13, 2021 at 11:17 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Co-founders of Israeli blockchain firm Orbs are being sued by former partner Elad Arad following the dissolution of his shares in a failed joint venture, Cointree Capital.

According to Israeli business media Globes, Arad is suing partners and brothers Uriel and Daniel Peled, Orbs, Cointree Management Microverse, Hexa Labs, and Hexa Solutions following a failed 18-month mediation in a Tel Aviv court. Arad claims the brothers committed “conspiracy, deceit and serious fraud, as well as unlawful enrichment.” The official report accuses the brothers of breach of fiduciary duty, oppression of a minority shareholder, breach of contract and breach of commitments, theft of commercial secrets, and negligence.

Initial reports suggest that the lawsuit could reach into the tens of millions of dollars as Arad is demanding a settlement from the Elad brothers' 12 separate digital currency offerings including Leadcoin, Kin, Orbs, Sirin, and Stox.

Arad claims the brothers allocated his Cointree Capital shares towards Hexa, a non-profit blockchain foundation. From the lawsuit:

"The respondents (the Peled brothers) exploited Cointree Capital's business opportunities to set up new companies based upon new opportunities in the new world of virtual currencies, as well as ideas and plans of Cointree Capital."

Orbs first launched in 2017 with an initial coin offering following in May 2018. It raised $118 million. A $15 million investment followed in December from Korean firm Kakao Investments

Interestingly, transactions between Orbs and two recent and large ICO's Kik and Sirin Labs are listed. Arad claims he was the contact point between Kik and the Peled brothers before they cut him off. Currently, Kik is under fire from the SEC for an unregistered securities offering. Earlier this year, Sirin Labs CEO Moshe Hogeg was given two months by an Israeli judge to settle an investment misappropriation charge by a Chinese investor. The current connection between Kik, Sirin Labs, and Orbs is unspecified.

Responding to the suit, Orbs says the claimant's demands are unremarkable. "We have not yet managed to study the claim documents, which were sent to us at the same time as they were distributed to the press and media," they wrote. "Unfortunately, the statement of claim did not surprise us, and follows previous attempts and threats on the part of the claimant."

As initially reported by CoinDesk in June, Orbs was invited by White House advisor Jared Kushner to discuss prospective blockchain solutions for aid distribution in the Palestinian territories.

UPDATE (09, August 16:00 UTC): A prior version of this story incorrectly stated the White House had chosen Orbs to create a blockchain-based land registry.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.