da Silveira, Virgilio Tarrago and another v Hashstacs Pte Ltd and another [2024] SGHC(I) 32

Introduction

Between August and December 2019, the first claimant Mr Virgilio Tarrago Da Silveira (“Mr Silveira”) purchased on two cryptocurrency exchanges 8,063,470.53 “STACS Tokens”, a form of cryptocurrency, then worth in total around US$76,000.00. The STACS Tokens were transferred by him to the second claimant (“Munchetty”), a company owned and controlled by him, in September 2020.

The claimants contend that Mr Silveira was induced to buy the tokens on the basis of certain representations for which the first defendant Hashstacs Pte Ltd (“HS”) was responsible and that those representations were false. HS is a company with which the second defendant Mr Soh Kai Jun (“Mr Soh”) has at all material times been associated.

The claimants assert that HS acted either fraudulently or negligently in making the representations and bring a claim against HS based on fraudulent misrepresentation, negligent misrepresentation and negligent misstatement, and against both HS and Mr Soh based on unjust enrichment and conspiracy. They have adduced expert evidence supporting a claim for damages for their loss at between US$20m and US$146m.

For its part, HS claims that the statements relied upon were statements that it was not responsible for, that, in any event, they do not constitute actionable representations at all, that they were not false, and that HS had not acted fraudulently or negligently. Both defendants deny that they have conspired to injure the claimants. The claim in unjust enrichment is also denied; indeed, both defendants contend that, as matters stand, each has made a loss.

There is thus a great deal at stake, both financially and reputationally.

Background

Technology

In this part of the judgment, I shall draw heavily (and with gratitude) from the Expert Report prepared on behalf of the claimants by Mr Jeremy Sheridan (“Mr Sheridan”), the Managing Director, Blockchain and Digital Assets at FTI Consulting Technology LLC.

The field involved is what is known as “Distributed Ledger Technology”, often referred to as blockchain which is, as Mr Sheridan explains, a revolutionary way of securely recording and sharing data across multiple locations without relying on a single central authority.

Mr Sheridan starts by giving a glossary of terms including the following:

(a) Blockchain;

(b) Cryptocurrency;

(c) Tokenisation;

(d) Real World Assets;

(e) Block;

(f) Node;

(g) Smart Contracts; and

(h) Verified Partners (“VPs”).

When describing “blockchain”, Mr Sheridan says this:

GSX, GBX, the GSX Group and Mr Cowan

In April 2012, Mr Nicholas Cowan (“Mr Cowan”) co-founded and was appointed chief executive officer (“CEO”) of Gibraltar Stock Exchange Limited (“GSX Ltd”), a Gibraltar based private company that was established to apply for a licence to operate the Gibraltar Stock Exchange. It received its full licence in 2014 which was renewed in 2018. It is regulated by the Gibraltar Financial Services Commission. In 2017, following new investment, the Gibraltar Stock Exchange Group Limited (“GSX Group”) was incorporated and GSX Ltd became a wholly owned subsidiary of GSX Group.

Mr Cowan has, at all material times, been the CEO of both GSX Group and of GSX Ltd. On 30 January 2024 GSX Group was acquired by Valereum PLC and Mr Cowan is currently CEO of Valereum PLC.

Mr Cowan’s vision was that GSX Group should eventually become one of the world’s first tokenised securities exchanges by implementing a blockchain solution. He outlines the strategy underlying the objectives of the GSX Group in paras eight and nine of his witness statement as follows:

Prior to his involvement with GSX Ltd and the GSX Group, Mr Cowan had worked in the finance industry for more than 40 years. He enjoyed a highly successful career working for Yamaichi Securities, ING Barings and Bear Stearns before becoming founding partner and Head of Trading at Caspian Securities, an investment bank in London, in 1995. In October 1996 he was appointed as the Global Head of Equities Trading at ING Barings London to seek to mitigate the losses suffered as a result of the activities of Nick Leeson. In due course he was appointed Global Head of Equities and became a member of the ING Barings Executive Board and of the ING Management Council which comprised the top 20 members of ING within the board of directors of the ING Group, ING Barings, ING Bank, ING Insurance and ING Asset Management. From 2008 to 2013 he ran his own trading fund known as NJC Trading.

Mr Cowan gave evidence on behalf of the defendants and was cross-examined on his witness statement by video link from Gibraltar. He was both clear and focused when giving his oral evidence. In oral closing, Mr Vikram Nair (“Mr Nair”), counsel for the defendants, submitted that Mr Cowan’s evidence was not self-serving and was objective and truthful. Mr Shaun Leong (“Mr Leong”), counsel for the claimants, did not dissent and accepted that significant weight should be attached to his evidence. I agree. I found him to be an impressive witness.

The new investor referred to at [10] above was an investment management company called Stellar Partners Limited (“Stellar”) which managed the investments of various private individuals including Mr Soh.

Mr Soh has a degree in accountancy from Nanyang Technological University. From 2010–2017 he was a director and shareholder of Broctagon Fintech Group (“Broctagon”) which was a Singapore-based consortium of financial technology companies specialising in supplying technological solutions to brokerages and exchanges.

In 2015 he co-founded Stellar which he deposes was an investment firm focusing on global equity, real estate and alternative investments. He was one out of eight limited partners and three general partners and was one of two directors of Stellar’s management company. Mr Soh had a 51% interest in Stellar.

Stellar originally invested £3m in GSX Group and subsequently a further £2m. In consequence, on 28 July 2017 Mr Soh was appointed to the board of the GSX Group as a nominee director representing Stellar’s interests. Mr Cowan states that Mr Soh was a non-executive director who did not participate in the day-to-day management of GSX Group which was handled by GSX Group’s management team. There is a debate as to the degree of involvement that Mr Soh had in the management of the affairs of the GSX Group which I shall have to resolve later in this judgment.

The Rock Token

Subsequent to the initial investment of funds by Stellar, in early 2018 Gibraltar Blockchain Exchange Limited (“GBX”) issued a prospectus for the sale of tokens named “Rock Token” entitled the “GBX+ Rock Token Sale Whitepaper” (the “Rock Token Whitepaper”). It takes the form of a conventional share offering. A helpful summary is contained on page five of the document:

On page 2 there is a list headed “Important Notice” which contains, inter alia, the following:

The relationship between GSX and GBX is explained in Part A Section 4 as follows:

At Part H the document explains that the GSX Group board has formed an executive committee in order to run the affairs of the group; both Mr Cowan and Mr Soh, amongst others, are identified as being members of the executive committee. Finally parts of Key Facts ii and iv listed in the prospectus’ Schedule should be noted:

The full amount of Rock Tokens was, apparently, sold out on the public offering in nine seconds in February 2018.

It is to be noted that although Mr Soh was a non-executive director of the GSX Group, as a member of the executive committee he was referred to in this document and on other occasions as an “Executive Director”. Mr Soh explains the function of the executive committee in para 22f of his Witness Statement:

The extent of Mr Soh’s involvement in the affairs of the GSX Group in his capacity as a member of the executive committee is in dispute.

The STACS Protocol and the STACS Token

On 14 November 2018 the GSX Group announced the establishment of Hashstacs Inc (“H Inc”), a joint venture with Prime Fintech Co Ltd (“Prime Fintech”), a Chinese blockchain developer based in Chengdu, and Chong Sing Fintech Holdings Ltd (“Chong Sing”), as being “the latest initiative by the GSX Group …in realising our vision for radically transforming the capital markets with our Securities Trading Asset Classification Settlement (STACS) Protocol …”.

This was followed on 16 November 2017 by a press release by Mr Cowan entitled “The STACS Protocol and what it means for RKT [Rock Token] holders”:

This was then followed by the publication by GSX Group on or about 23 November 2018 of a document entitled “The Securities Trading Asset Classification Settlement (STACS) Protocol Whitepaper v1.0” (“The First Whitepaper”).

Unlike the Rock Token Whitepaper, this was not a fund-raising prospectus; it is a very extensive marketing proposal. The nature and extent of it can be seen from the abstract in Section 1.

The following sections should be noted:

The Summary in Section 10 includes the following:

On 21 December 2018, the First Whitepaper was replaced by a second whitepaper (the “Second Whitepaper”), again issued by GSX Group. It differs only in immaterial detail from the First Whitepaper.

The First Whitepaper indicated that the Rock Tokens would be swapped for STACS Tokens and this was done pursuant to a document entitled “Terms and Conditions Relating to Token Swap” (the “STACS Token T&Cs”) dated 22 November 2018.

This was distributed by GBX to Rock Token holders under cover of an e-mail from Mr Cowan dated 23 November 2018. Paragraphs 20 and 21 of Schedule 2 of the STACS Token T&Cs read as follows:

Schedule 3 goes on to list the various risk factors in an extensive but non-exhaustive fashion. Paragraph 4 reads as follows:

Although both whitepapers refer to H Inc, H Inc was not in fact incorporated (in the British Virgin Islands) until 21 January 2019. There was a single shareholder, Forever Honest International Limited (“Forever Honest”), and the sole director was Mr Phang Yew Kiat, a Prime Fintech employee.

Forever Honest was a wholly owned subsidiary of Chong Sing; the arrangement between Forever Honest, Prime Fintech and the GSX Group was formalised in a Joint Venture Agreement dated 23 January 2019 (the “JVA”).

Clause 2 of the JVA provided that:

Clause 3 specified that the company should be called Hashstacs Inc and that the shareholding should be 100 shares divided into 34 for Forever Honest, 15 for Prime Fintech and 51 for GSX Group. Clause 7 provided that H Inc should incorporate two subsidiary companies, one in Singapore for business development, operational support and marketing of STACS (defined as being the STACS Protocol) and the second in Hong Kong to hold the intellectual property rights. The former (HS) was incorporated in Singapore on 15 February 2019 with Mr Soh as a director. The Hong Kong company was never incorporated.

On 20 June 2019, Mr Cowan, Mr Soh and Mr Adrian Hogg (The COO of the GSX Group) were appointed directors of H Inc.

The JVA was amended on 22 July 2019 whereby Stellar became a party and Forever Honest sold its shareholding to Stellar. Recital (F) provided that:

Following its incorporation, according to Mr Soh, on or around 18 March 2019 HS assisted H Inc to amend the Second Whitepaper and produced the STACS Network Whitepaper v 1.2 (the “Third Whitepaper”) on GSX Group’s instructions.

This version, on its face, emanated from H Inc rather than the GSX Group and the front page is coloured in blue rather than the red of the previous two versions.

My attention was not drawn to any material alteration to the text of the document in addition to the change of name and colouring other than in relation to the STACS Token. More specifically the Consensus Incentives in section 8.3.1 remained the same. It is this passage that contains the representations relied upon by the claimants in this action as being false. I shall therefore repeat the passage here:

Section 5.1.9 remained the same. However, although the reference to Section 9 remains, Section 9, in so far as it related to the STACS Token, has been deleted with the Summary becoming Section 9. The claimants place significant reliance on this deletion.

Mr Soh accepts that HS uploaded the Third Whitepaper onto the website “stacs.io” but maintains that at that time this was a website owned and controlled by GSX Group and that it was attributed to H Inc, not HS.

The Pleaded Case

With this background I can turn to consider the pleaded case.

The first issue that arises did so in a somewhat opaque manner. In para two of the Statement of Claim (“SOC”), it is pleaded that Munchetty holds the STACS Tokens purchased by Mr Silveira on trust for Mr Silveira. This is not admitted in para 6 of the Defence. As the case developed it became clear that the defendants were raising a positive case that the transfer of the STACS Tokens was by way of a capital injection into Munchetty and hence they no longer belonged to Mr Silveira such that he had no title to sue. I shall refer to this as the “Trust Issue”.

The main substantive issues in the case however relate to the representations allegedly made in the First to Third Whitepapers. Paragraph 27 of the SOC refers to the First Whitepaper as being a document emanating from the GSX Group “where the GSX Group announced that going forward it was developing and going to offer the STACS Protocol through a joint venture and subsidiary, Hashstacs Inc. (i.e. Hashstacs)”.

However in para three, it is the first defendant, ie, HS, the Singapore company, that is defined as being Hashstacs, not H Inc, the BVI company, and it is pleaded that Hashstacs is “commonly referred to as ‘Hashstacs Inc.’, or generally as ‘STACS’ in relevant marketing and communication material”. This elision of the two company names is repeated throughout the SOC but is denied in para 11 of the defence. Throughout the defence, reliance is place on the fact that H Inc and HS are separate legal entities and on the assertion that HS is not responsible in law for any representations made by H Inc. This distinction lies at the heart of the dispute between the parties.

The SOC does not refer to the Second Whitepaper but in para 31 pleads as follows:

The defendants take issue with this in para 82 of the Defence which states:

The claimants then set out the representations relied upon in para 34 of the SOC (the “Third Whitepaper Representations”). These are based upon the Consensus Incentives in section 8.3.1 of the Third Whitepaper:

In para 35 reliance is also placed on representations on the web address “https://stacs.io” (the “Website Representations”):

The Defence denies that the representations were made by HS.

In paragraph 36, the claimants plead as follows:

The defendants respond to this paragraph in para 105 and 106 of the Defence.

The Defence then cites extensively from the STACS Token T&Cs in para 107 of the Defence and asserts in para 108 that the claimants were bound by those T&Cs. This is denied in paragraphs 6 to 20 of the Reply.

The defendants contend that as a purchaser of the STACS Tokens the claimants would have or ought to have known that the holding of such tokens would have been governed by terms and conditions and that accordingly by purchasing the tokens, they were bound by the STACS Token T&Cs . More specifically, clause 6.5 makes it plain that any transfer of STACS Tokens would serve to bind the transferee.

The claimants contend that since the STACS Tokens were bought on the open market rather that as part of the token swap of Rock Tokens for STACS Tokens, neither Mr Silveira nor Munchetty knew of or ought to have known of the terms and conditions and therefore were not bound by them. I shall refer to the issue of whether the claimants were bound by the STACS Token T&Cs and the consequences if they are, which include the question of Munchetty’s entitlement to sue, as the “STACS Token T&Cs Issues”.

Although the Website Representations were pleaded separately from the Third Whitepaper Representations, they are in substance the same and no separate case was raised in relation to them in closing submissions. I shall therefore focus on the Third Whitepaper Representations.

The SOC then goes on to plead that the STACS Protocol was successfully implemented and adopted by the financial industry which is not admitted in the Defence.

In para 58–60 it is pleaded that Mr Silveira purchased his holdings of STACS Tokens between August and December 2019 “induced by and acting in reliance of [sic]” the Third Whitepaper Representations.

This is denied in para 175 of the Defence in the following terms:

The SOC proceeds to contend that the Third Whitepaper Representations were false. This allegation is based upon the assertion that HS did not implement the STACS Protocol in the manner indicated in the Third Whitepaper Representations but instead subsequently swapped it for a different token, the GATE Token – which only had utility in relation just to GSX as a single user specific token operating only on Native STACS. This is denied in the Defence. The kernel of this defence is contained in paragraphs 10, 48 and 52:

The plea of fraudulent misrepresentation is made in para 67–69 of the SOC. It is based in large part on a YouTube video (the “YouTube Video”) released by Mr Soh in December 2021 in which Mr Soh stated that he expected HS to generate transaction fee revenue escalating to some US$9m in 2022 and then to US$39m in 2024. It is asserted that had this revenue been generated in the manner represented in the Third Whitepaper using the STACS Token as proposed it would have led to a significant increase in the price of the STACS Token. The contention is that Mr Soh knew that this was false and that the removal of Section 9 in the Third Whitepaper served to demonstrate that Mr Soh knew at the time that the transaction fees would not be powered by the STACS Token.

The Defence to this is contained in para 193–225. Paragraphs 198 and 202 are particularly relevant:

In simple terms, the Defence draws a distinction between activities under the STACS Protocol which it is alleged was the responsibility of GSX Group who made the decision to change the STACS Token to the GATE Token on the one hand, and the business of HS developed in relation to activities separate from the STACS Protocol on the other. The YouTube Video related, it is said, to the latter and had nothing to do with the former.

Based on the same underlying facts and assertions, the claimants raise a case in negligent misrepresentation or negligent misstatement. As pleaded, it was asserted that HS was liable for all three torts but that Mr Soh was personally liable for negligent misrepresentation. This latter allegation was not pursued in closing submissions.

Finally, it is asserted that both Mr Soh and HS are liable to the claimants for unjust enrichment and for conspiracy, both by lawful and unlawful means.

This is denied in the Defence. Once again the pleading emphasises that the business of HS is wholly separate and distinct from that of GSX Group.

The Issues

The following issues therefore arise for consideration:

(a) the Trust Issue. Does Mr Silveira have title to sue?

(b) the STACS Token T&Cs Issues. Are the claimants bound by the T&Cs and, if so, what are the consequences?

(c) fraudulent misrepresentation;

(d) negligent misrepresentation;

(e) negligent misstatement;

(f) unjust enrichment;

(g) conspiracy; and

(h) assessment of damages.

I propose to consider issues (c)–(e) first.

Issue (c): Fraudulent Misrepresentation

The Law

The applicable principles of law are not in dispute. They were expressed by the claimants in their written closing submissions as follows:

The five elements were also referred to in the Defendants’ Written Closing Submissions.

The first, second and fifth elements relate to the actions, knowledge and intentions of the person allegedly responsible for the making of the false representation. In the circumstances of this case these three elements are interrelated and should be considered together. They raise the following sub-issues.

(a) First, were the representations in law actionable representations?

(b) Second, was HS the (or one of the) representor(s)?

(c) Third, were the representations false at the time they were made?

(d) Fourth, did the representations subsequently become false?

(e) Did HS “know” that they were false at the time that they were made?

(f) Did HS become aware that the representations had become false at a later date?

(g) Were the representations made by HS with the intention that they should be acted upon by Mr Silveira or by a class of persons to which Mr Silveira belonged – namely, holders of STACS Tokens?

The claimants’ case is that HS was responsible for issuing the Third Whitepaper and rely upon the wording of the Consensus Incentives in section 8.3.1 as the passages in the Third Whitepaper which give rise to the representations. They contend that the alterations made to the wording of the Third Whitepaper from that in the First and Second Whitepapers, particularly those relating to the deletion of Section 9 concerning the STACS Token, were deliberately introduced by Mr Soh, acting in his capacity as a director of HS, with the intention that the STACS Protocol should operate without the STACS Token and that HS would reap the rewards of the success of the STACS Protocol rather than the owners of the STACS Tokens.

Reliance is placed particularly on some interchanges between Mr Silveira and Mr Soh in a series of e-mails in August and September 2020 which I shall have to consider in some detail below. The crux of the claimants’ case is however summarised in para 66(d) of the claimants’ written closing submissions:

This is encapsulated in para 130 of Mr Silveira’s witness statement:

The defendants’ case is that Mr Silveira was working under a misunderstanding of the nature of HS’s business and failed to appreciate that the STACS Token was specific to the STACS Protocol operated by GSX Group, not by HS.

It is thus necessary to consider the history of the developing relationship between GSX Group, GSX, GBX, H Inc and HS (together referred to as the “Participants”) from the time of the latter’s incorporation in February 2019. This will involve identifying the role played from time to time by Mr Soh and determining on whose behalf he was acting at that time. It is he and he alone who is said to be the controlling mind of HS such that his acts, knowledge and intentions are said to be the acts, knowledge and intentions of HS.

The Witnesses

Three witnesses of fact gave evidence: Mr Silveira, Mr Soh and Mr Cowan. I have already considered the standing of Mr Cowan as a witness at [14] above.

Mr Silveira’s expertise lies in the UK financial industry, particularly in mergers and acquisitions when employed by Barclays Bank for some ten years. He accepted that he had no technical expertise and relied on experts for that. He described himself as being a cautious sophisticated investor. His investment in STACS Tokens was one of his first investments in the crypto field.

Much of Mr Silveira’s witness statement is based upon documents he had obtained emanating from the Participants from which he asserts that he formed his perceived understanding of the nature of the Participants’ business. It was the understanding that he formed as to the proposed nature of the STACS Protocol and its reliance on the STACS Token that induced him to purchase the STACS Tokens in the autumn of 2019. Equally it was his understanding of the way in which Mr Soh then went about developing the business of HS so as not to make any use of the STACS Token that led him to conclude that HS, through Mr Soh, had acted fraudulently. Throughout his witness statement he drew little distinction between H Inc and HS.

Mr Silveira was cross-examined on his perceived understandings and the conclusions he had reached on the basis of those understandings. He had a guarded attitude towards answering fairly straightforward questions and tended to answer them at some length with the intention of clarifying his point of view. Regrettably in some cases this had the opposite effect but, in the end, a measure of judicial confusion was resolved. It was not suggested by counsel for the defendants that Mr Silveira was anything other than sincere in giving the evidence that he did or in holding the views that he expressed. I accept that he was sincere in this respect.

The question however is not whether the witness truly held the beliefs he expressed but whether the facts support those beliefs.

The third witness of fact was Mr Soh. Mr Soh is an accountant by training but since 2010, when he co-founded Broctagon, he has been involved in the financial technology field. In 2017 he left Broctagon.

Prior to this, in 2015, Mr Soh co-founded Stellar. It was by virtue of his introduction to Mr Cowan in 2017 that Stellar became an investor in GSX and then the GSX Group and Mr Soh became a director of both entities. Stellar’s investment was structured through Cyberhub Fintech Holdings Limited (“Cyberhub”) which held GSX shares on trust for Stellar.

Mr Cowan and Mr Soh gave evidence as to the way in which that relationship developed and the dealings between GSX Group and its joint venture partners.

Mr Soh was cross-examined at length. He was at pains to emphasise the distinction between the actions of HS and H Inc but this was not surprising having regard to the fact that Mr Silveira had been at pains to do the opposite. Whilst not technically qualified he plainly had a good understanding of blockchain technology. He became somewhat frustrated when he felt that his explanation of various aspects of the technology which were clear to him were not being accepted by, and possibly not understood by, the cross-examiner.

In paras 34–57 of their written closing submissions the claimants expand at length on the reasons why they contend that Mr Soh was evasive, untruthful and gave evidence which was not supported by the documents. It is convenient to consider each of the allegations made against Mr Soh as and when they arise in the course of the factual matrix, following which I shall reach conclusions as to the weight to be attached to Mr Soh’s evidence in the light of the claimants’ submissions as to his credibility.

The Facts

The following facts constitute the factual matrix underlying this dispute. They are either not in dispute or are established on the balance of probabilities.

The First Whitepaper

The starting point is the issuance of the Rock Token and its subsequent development into the STACS Token and the publication of the First Whitepaper in November 2018 (see [19]–[31] above).

Mr Cowan gave evidence that the First Whitepaper was prepared by him and his team at GSX Group. In cross-examination he was asked about the part played by Mr Soh in this exercise.

Mr Soh’s evidence was to like effect. On the basis of this I am satisfied that it was Mr Cowan who had the idea underlying the STACS Protocol and the use of the STACS Token in relation to it. He was also the driving force behind the First Whitepaper which was prepared by him and his team at GSX Group.

Any input from Mr Soh was limited and was given in his capacity as a director of GSX Group. Such as it was, it cannot be attributed to HS directly since HS had not been incorporated by this date.

What then is the character of the First Whitepaper? What is it proposing and to whom? What, in particular, is it proposing with regard to the use of the STACS Token?

The First Whitepaper is not a prospectus seeking investment by third parties. As is apparent from reading the document, it is describing a proposed new system for trading assets using the STACS Protocol – as is implicit in its full name – Securities Trading Asset Classification Settlement Protocol. It represents a vision as to the way in which the GSX Group aimed to support financial institutions initially by providing them the Native STACS followed by allowing this to scale up globally through the public Global STACS. It is a marketing document explaining that vision and the way in which it was proposed to be implemented. The aspirational nature of the project is apparent throughout the document as can be seen from the following extracts:

It is in the light of such comments and in the context of the document as a whole that the reader will come to assess the meaning and implications of the undertakings given in Section 8.3.1 as to how the transaction fees would be distributed. The document is not directed to an uninformed audience; it is directed to financial institutions with a view to encouraging them to adopt Native STACS and in the course of time Global STACS. I also consider that it was directed to those “speculators or investors” who are purchasers of tokens.

It must be read through the eyes of such people who have a degree of understanding of the marketplace in question. This was an innovative development in the blockchain field, a field that was recognised as being speculative. No serious investor, either in the form of a financial institution or an investor in STACS Tokens, would have considered that involvement in the project was devoid of risk or that there were any guarantees of any degrees of success. But what they would have understood was that, in so far as the project took off, the system would be financed as indicated in Section 8.3.1.

I therefore hold that the representations relied upon by the claimants were representations made in the First Whitepaper as to the way in which transaction fees generated by implementation of the STACS Protocol would be distributed with the important caveat that this was to the extent that it proved viable to implement the STACS Protocol. This would depend on the degree of success that was achieved in marketing the proposal.

I also hold that the First Whitepaper was published by GSX Group in good faith. It was not suggested to Mr Cowan that he intended to act otherwise than in accordance with the representations, nor that he was not going to use his best efforts to make the project a success.

The attack made on Mr Soh’s lack of good faith lies in the alterations made to the Third Whitepaper and his subsequent conduct. There is no evidence to suggest that at the date of the First Whitepaper, Mr Soh was anything but fully supportive of the project.

The Joint Venture

The Second Whitepaper was published, again by GSX Group, in December 2018 but nothing turns on this. However, by this date, although H Inc was referred to in both Whitepapers as being “the GSX Group technology joint venture”, it had yet to be incorporated.

As can be seen from the illustration of the various divisions of the GSX Group, H Inc was to be responsible for “STACS Protocol”, “Blockchain Development”, “Enterprise Wallet”, and “Exchange Platforms” whereas GBX was responsible for token sales and cryptocurrency trading.

The joint venture referred to was the JVA dated 23 January 2019 (see [37]–[41] above). Clause 3.1 provides for the incorporation of H Inc which is defined as being “the Company” and Clause 2.1 defines the business of the Company as follows:

STACS is defined as being the STACS Protocol but to avoid any possible confusion with subsequent use of the acronym STACS in other contexts, I shall continue to refer to the STACS Protocol rather than the abbreviation STACS when considering the protocol itself.

The “business” of H Inc extends not only to the development, by H Inc or its subsidiaries, of the STACS Protocol blockchain together with the business development of the STACS Protocol but also to the “customised development/implementation of the STACS [Protocol] or related blockchain products”.

Clause 7 relates to the incorporation of HS which was to be a wholly owned subsidiary of H Inc “for business development, operational support and marketing of STACS [Protocol]”.

The working relationship between the joint venture parties and H Inc essentially involved Prime Fintech devising the blockchain code for the various aspects of the STACS Protocol and supplying it to H Inc. This was apparently pursuant to the payment of the sum of US$1.5m by GSX Group to Prime Fintech.

The Third Whitepaper

The Third Whitepaper was published on 18 March 2019. On its face it is published by H Inc but the underlying text is taken verbatim from the earlier Whitepapers save for the removal of Section 9. There is no mention of HS. It is quite clear that although it is published by H Inc this is part of a scheme devised by the GSX Group of which H Inc is the entity within the GSX Group that has responsibility for the STACS Protocol. The same wording and the roundel set out at [105] above is reproduced. It is also apparent that it is the GSX Group that has developed the STACS Protocol through the joint venture.

Nothing, to my mind, could be clearer than the statement in para 2.3 of this Whitepaper, which also appeared in the earlier versions:

However, it is the claimants’ case that the involvement that HS had in the rewording of this document renders it liable in law for the representations relied upon in this action and that the rewording was orchestrated by Mr Soh in his capacity as a director of HS well knowing and intending that the change was part of a fraudulent venture calculated to enable HS to profit from the successful promotion of the STACS Protocol rather than the GSX Group and holders of STACS Tokens, such Mr Silveira.

It is thus necessary to consider the amendments. In essence these consist of the removal of Section 9 although Section 5.1.9 still retains the reference to it. As the document now stands it states that the entire “STACS Ecosystem” will be powered by the STACS Token and that VPs will have to stake STACS Tokens to be able to host nodes. It goes on to refer to the need for VPs to stake more STACS Tokens to be able to run “Supernodes” and then identifies how the fees generated will be shared, inter alia, with the “Global” nodes and Supernodes.

What is missing is the further explanation of the STACS Token. Section 9.1 in the earlier documents is an amplification of the way in which STACS Tokens will be the utility token of the STACS Protocol. It adds little to the explanation in Section 8.3.1. Section 9.2 is an explanation to existing GBX Rock Token holders of the impact that the change from Rock Tokens to STACS Tokens will have should they accept the invitation to swap their token for the STACS Tokens. It also informs the reader that all 900,000,000 Rock Tokens have been put into circulation and that no further tokens will be minted. Section 9.3 draws together the various factors which serve to provide utility of the STACS Token which, in the main, have been described more fully in the body of the document.

Mr Cowan gave evidence as to the reasons for the omission of Section 9 in paras 29 and 30 of his witness statement:

He was cross-examined on this evidence and in substance confirmed his written evidence. He described the changes as being minor changes which did not affect the way in which the STACS Protocol was intended to operate. It was not suggested that Mr Cowan was being anything other than truthful in his understanding of the reasons for making the amendments and I accept that this was his understanding.

Mr Soh gave similar evidence in para 52.b of his second witness statement but made the additional point that H Inc was not involved in the Rock Token to STACS Token swap which by then had already occurred. He expanded upon this in his cross-examination where he repeated his reasoning for wishing to remove Section 9 but accepted that so far as the GSX Group was concerned the STACS Ecosystem required the STACS Token.

The qualification “so far as GSX Group is concerned” is important. Mr Soh’s evidence is that operation of the STACS Protocol did require the STACS Token but that later developments of other blockchain products by HS did not. In cross-examination the expression STACS Ecosystem was on occasions used more widely than merely to refer to the STACS Protocol so as to include these later developments and it is the claimants’ case that this was a correct usage as the later developments should have employed the STACS Tokens.

Hence although the claimants do not challenge that the amendments to delete Section 9 were made for the reasons given by Mr Cowan and Mr Soh, they contend that, so far as Mr Soh was concerned, he had an underlying motivation in removing the section so as to enable him to defraud the owners of STACS Tokens of revenue which they would have been entitled to had the STACS Tokens been the utility tokens for HS’s subsequent developments – which they should have been. I shall return to this issue at [216]–[220] below.

Drawing all this together, the Third Whitepaper was a minor update to the earlier Whitepapers containing only insignificant modifications other than substitution of the name of H Inc as the publisher, the colour change to blue and the removal of Section 9. The emphasis remained on the GSX Group being the driving force behind the STACS Protocol with GBX being responsible for token sales and H Inc for the STACS Protocol. There was no reference to HS but HS did contribute to the revised wording.

The marketing of the STACS Protocol

The purpose of the three Whitepapers was to promote the STACS Protocol to interested parties. This was done as well by a variety of means including through a Telegram (a chat application) channel from November 2018, notices put out on social media by members of the GSX Group from 28 January 2019, by the STACS Litepaper in March 2019, and by attendance at conferences. As the social media extracts show, reference was made to H Inc and not to HS. They also refer to the attendance of representatives of the GSX Group at conferences in London and Hong Kong.

The latter conference was attended by Mr Soh, who was quoted as being “Executive Director of the GSX”. Mr Soh attended a number of conferences to assist in the promotion of the STACS Protocol. Mr Soh gave evidence in his second witness statement that his role on the executive committee of GSX Group was limited to providing advice and support in terms of networking and promotion of GSX Group to potential partners in Asia.

It was in this capacity that, for example, he attended the 2018 Singapore FinTech Champions event, where his biography stated that he was “Executive Director Gibraltar Stock Exchange Group” and that he was “developing the Group’s growth strategy together with the Global Executive Committee and [was] in charge of executing it in newer markets, especially in Asia”. Mr Soh had no recollection of this event but accepted that he was involved in advising the GSX Group on strategy in Asia. In his cross-examination he accepted that he had been represented publicly as the executive director of GSX Group on a number of occasions and considered this was appropriate.

A number of other occasions on which he spoke at or attended meetings or conferences both before and after the incorporation of H Inc where he was described as being an executive director of GSX Group were put to him in cross-examination. The passage of cross-examination ended with the following:

Mr Silveira himself accepted that it was common in the banking industry to have titles like managing director and executive director as business titles even if the person in question was not on the board of directors and that this was not misleading. Mr Cowan’s evidence was to like effect.

I conclude from this that at all times both before and after the incorporation of H Inc, Mr Soh was actively promoting the business of the GSX Group in Asia in support of the promotion that Mr Cowan and his team in GSX Group were engaged in in Europe. I see nothing sinister in the use of the title “Executive Director” particularly when Mr Soh was a member of the executive committee. It was a public-facing title to indicate that he spoke with authority about the business of GSX Group which was the case.

The documents and evidence also demonstrate that representatives of the GSX Group, including Mr Cowan and Mr Soh, were actively promoting the STACS Protocol both before and after the incorporation of H Inc. It was not suggested that Mr Soh was not doing his utmost to promote GSX Group’s STACS Protocol and it is clear that he was. But this was in his capacity as an “Executive Director” of GSX Group, not in his capacity as a director of HS.

The Third Whitepaper indicated that the first version of live implementation of the STACS Protocol was expected by Q1 2019. This did not occur.

The Subsequent History

The subsequent history of the development of the STACS Protocol project by GSX Group and the contribution made to this by HS, the relationship between HS on the one hand and GSX Group, including H Inc, on the other and the development work done by HS other than specifically directed to the STACS Protocol is somewhat complex.

In simple terms, the defendants’ case is that:

(a) The STACS Protocol project was directed from Gibraltar by GSX Group and by Mr Cowan in particular. Although H Inc was the joint venture vehicle and was not wholly owned by GSX Group, GSX Group was the majority shareholder and directed its activities.

(b) One of the functions of HS pursuant to the JVA was to support the STACS Protocol (clause 7.2) but as a subsidiary of H Inc it was also entitled to develop other related blockchain products (clause 2.1). This it did, with the knowledge and agreement of GSX Group.

(c) These related blockchain products did not use the STACS Token (which the claimants contend that they should have done).

(d) Although GSX Group did launch Native STACS, Global STACS was never launched and difficult trading conditions caused it to revise its business plan radically which led to STACS Tokens being swapped into a new token called the GATE Token. HS played no part in this although it did continue to provide technical support for the STACS Protocol.

(e) HS developed a number of related products none of which was successful commercially.

(f) In the course of time the relationship between GSX Group, the joint venture partners and HS changed such that HS became an independent company and H Inc was dissolved.

It is convenient to divide up the analysis of the facts into the following:

(a) the changing relationship between the Participants;

(b) the activities of GSX Group in relation to the STACS Protocol; and

(c) the activities of H Inc and HS allegedly not in relation to the STACS Protocol.

The changing relationship between the participants

Under the January 2019 JVA, Forever Honest held 34 shares in H Inc, Prime Fintech held 15 shares and GSX Group 51 shares. Mr Soh was not at that time a director of H Inc. HS was incorporated as a wholly owned subsidiary of H Inc on 15 February 2019 and Mr Soh was one of the two directors. In June 2019 there was a capital raise via a share allotment which Forever Honest and Prime Fintech did not take up. Stellar took up their allotment and Mr Soh was appointed a director of H Inc.

In July 2019 Forever Honest indicated that it wished to withdraw from the joint venture and Stellar purchased Forever Honest’s shares in H Inc. This was recorded in the Amendment and Restatement Agreement and Deed of Adherence dated 22 July 2019 (the “JVA Amendment Agreement”). The agreement also provided that a service agreement should be executed to regulate the provision of development services from Prime Fintech to H Inc and that the payment for the development services including all relevant intellectual property had been paid by GSX Group on behalf of H Inc. The Service Agreement was executed on 28 October 2019.

On 26 March 2020, H Inc divested ownership of HS to the joint venture partners, namely GSX Group, Prime Fintech and Stellar; Stellar transferred its shares in HS to Mr Soh.

In para 64 of his witness statement Mr Soh gave evidence as to the consequences of this as follows:

In consequence, on 3 November 2020, H Inc was dissolved and between 28 March 2020 and 3 February 2023 the GSX Group gradually divested its shares to Mr Soh.

The activities of the GSX Group in relation to the STACS Protocol

It is apparent from the contemporaneous documents that little distinction was drawn between the activities of GSX Group as the holding company and the activity of its two subsidiaries, GBX and H Inc. The promotion of the STACS Protocol was portrayed as being under the overall umbrella of GSX Group under the leadership of Mr Cowan.

As indicated in [129] above, the STACS Protocol did not go live in the first quarter of 2019. Pilot projects were carried out between March and June 2019 details of which are given in para 53 of Mr Soh’s written statement. In July 2019, in a document entitled “STACS Network” published by H Inc, these pilot projects are reviewed and the document ends by stating “Ready to Deploy. Today.” Counsel for the claimants drew my attention to the fact that on page 746 it was stated that H Inc had its “HQ” in Singapore. This was one of a number of references to the business of H Inc being based in Singapore.

However it does not appear that any part of the STACS Protocol was ready to be deployed commercially in July 2019. On 19 November 2019, GSX Group announced that it was rolling out a new GSX Group platform which would enable it to “[g]o-live on the GSX ‘Main-Net’ of Native STACS” and that in consequence it proposed that STACS Tokens would transfer over to a new token, the GATE Token.

This was amplified by Mr Cowan in a screenshot from the Telegram channel (now renamed The GSX Group Community) on 5 December 2019. This explains that regulatory compliance was preventing development of the business as proposed in the Whitepapers and that the first digital launch of Native STACS was to be in December.

A further announcement was made on 12 February 2020, again dealing with the transfer from STACS Tokens to GATE Tokens indicating that preparations were still in hand for the launch of the “GSX Group Native STACS Mainnet”.

The focus at this time was on launching Native STACS and by August 2020, it appears that the GSX Group was still focusing on Native STACS rather than Global STACS Protocol as can be seen from the Purchasing, Services and Ratification Agreement (“PS&R Agreement”) dated 5 August 2020 which related solely to Native STACS as defined in Schedule 1. This agreement provided, inter alia, that the technology referred to in Schedule 1 was the property of GSX Group (Clause 5.5) and that this term included the intellectual property and source codes (Clause 1.1).

Mr Cowan was cross-examined on this when he said:

For reasons explained by Mr Cowan in his witness statement the process of swapping STACS Tokens for GATE Tokens was delayed primarily because of adverse trading conditions being experienced by GSX Group. The swap eventually took place in January 2021.

A good deal of emphasis was placed on the swap of STACS Tokens for GATE Tokens at the trial, it being part of the claimants’ case that this exercise was part of a ploy to deprive holders of STACS Tokens of the benefits which they anticipated would be obtained from a successful implementation of the STACS Protocol. However what is quite plain is that the exercise was conducted by GSX Group and that there was no involvement of HS and that any part played by Mr Soh was not in his capacity as a director of HS.

Mr Cowan explained the underlying purpose in paragraph 44 of his witness statement:

This resulted eventually in the GATEnet Whitepaper published on 31 March 2021. GATE is an acronym for “Global Asset Tokenised Ecosystem”. This makes it clear that it is a GSX Group initiative and the authors are stated to be Mr Cowan together with Mr Adrian Hogg, the chief operating officer of GSX Group and Mr Mikko Ohtamaa, the Blockchain Advisor.

The history is recorded in Part E:

In paragraphs 58 and 77–80 of his second witness statement Mr Soh gave the following evidence:

Mr Soh was cross-examined on his involvement in, the motivation behind and the effect of the swap. He made it clear that GATENet had nothing to do with him but he did explain why, as a STACS Token holder, he thought that the change to the GATE Token represented greater utility for the token.

I accept Mr Soh’s evidence that he was not involved in the decision to effect the change. I also accept his evidence that the change did open the door for potential use of the token otherwise than in conjunction with the STACS Protocol. Mr Cowan’s evidence satisfies me that the vision of a Native and Global STACS Protocol as set out in the Whitepapers had not become a reality because of the difficulties he encountered. Indeed, Global STACS was never launched.

The activities of H Inc and HS allegedly not in relation to the STACS Protocol

Part of the responsibilities of HS, when it was a subsidiary of H Inc and thereafter, was to provide operational support to GSX Group for the STACS Protocol including software updates. However its business was not limited to this and in the course of time HS began to develop and market other blockchain technological solutions.

Mr Soh gave evidence about these solutions in para 62 of his second witness statement. The first, in July 2020, was HS’s Settlity infrastructure which, as Mr Soh states was based on the same underlying blockchain technology as the STACS Protocol. This reached a proof-of-concept stage with Bursa Malaysia Berhad but was not progressed further. The potential for confusion between HS and the GSX Group’s work with the STACS Protocol was introduced by the adoption by HS of the abbreviation STACS for its full name Hashstacs in these and subsequent documents.

The second, in October 2020, was another proof-of-concept project this time with EFG Bank and supported by the Monetary Authority of Singapore (“MAS”) “using distributed ledger technology (DLT) to automate and manage the entire lifecycle of a structured product … consist[ing] of the underlying STACS blockchain and smart contracts”. Mr Soh states that this project, known as the Nathan platform, utilised HS’s technological solution based on the Ethereum blockchain but again was not progressed further than the proof-of-concept stage.

The third, Project Benja, with Deutsche Bank, again supported by the MAS related to the “technological and practical feasibility of digital assets interoperability, liquidity, cross-border connectivity, and smart contract templates”. This was based on the same underlying blockchain technology as the STACS Protocol. In the Project Report in section 4.2 at page 19 the Technical Architecture is described as follows:

Mr Soh continues in paras 63(b) and (c):

Mr Soh was cross-examined at some length on these developments. He amplified on the nature of Settlity, Trident, Mercury and Nathan:

The potential for confusion arose because of the use of the term “STACS Protocol” to refer to the Native STACS as promoted by GSX Group and the use of STACS Blockchain as used by HS in the development of Settlity, which Mr Soh explained was based on the same blockchain technology as was the STACS Protocol, and Trident which he said was initially based on the same blockchain technology underlying the STACS Protocol but which was later moved to the Ethereum blockchain.

Mr Soh clarified the position in answer to a question from the court:

The distinction can be seen visually in the diagram at [156] above which shows the underlying STACS blockchain on which the application layer is superimposed. Mr Soh was at pains to emphasise that everything developed on the same blockchain technology as the STACS Protocol did not necessarily have the same functionality as the STACS Protocol and that Settlity and Trident did not.

Mr Soh also explained the reason why HS had a preference for developments based on the Ethereum blockchain:

The underlying focus of the cross-examination proceeded on the basis that the products developed by HS were developments of the STACS Protocol such that they should have used the STACS Token as the utility token.

The first piece of evidence that was challenged was Mr Soh’s statement that the STACS Protocol was based on the underlying blockchain developed by Prime Fintech which was not Ethereum based. It was challenged repeatedly and at length and Mr Soh dealt patiently with each challenge. The evidence was summarised in the following passage:

It is however apparent that Mr Silveira was under the impression that the STACS Blockchain was an enhanced version of the Ethereum chain. Equally Mr Cowan in cross-examination gave evidence of his belief that the STACS Blockchain was based on the Ethereum platform but he accepted that he was not a technologist.

Drawing all this together, I am satisfied on the balance of probabilities that Mr Soh’s evidence is to be preferred. He was intimately involved in the development of HS’s products and gave cogent evidence as to why he felt the need to migrate HS’s products away from the STACS Blockchain onto an Ethereum-based blockchain. This would have been unnecessary if the STACS blockchain was itself an Ethereum-based blockchain.

The claimants suggest that this distinction was a new case developed during Mr Soh’s oral evidence. I do not accept that. It was undoubtedly amplified upon during his oral evidence but this was necessitated by what he saw, with some justification, as confusion on the part of the claimants. However it is consistent with his written evidence and with the contemporaneous documents. It is also consistent with the evidence he gave at paras 52–67 of his third witness statement dated 31 May 2024 in response to the claimants’ application for further disclosure. No contemporaneous document was put to Mr Soh where the blockchain underlying the STACS Protocol was said to be Ethereum-based. While it is true that Mr Cowan said that it was Ethereum-based, he is not a technologist and I prefer the evidence of Mr Soh.

I therefore conclude that in giving the evidence he did, Mr Soh was not seeking to mislead the court as to the underlying blockchains and that this was not an attempt on his part to seek to distance the HS developments from the STACS Protocol.

Next the claimants sought to rely on some statements made by Mr Soh during some interchanges between Mr Silveira and Mr Soh which took place in August and September 2020. The suggestion is that Mr Soh made some observations which indicated that the STACS Protocol was designed from the outset to operate without any STACS Tokens.

These consisted of Zoom calls and e-mail exchanges. The e-mail exchanges were helpfully drawn together in Trial Exhibits 2 and 4. They began on 26 August 2020 following a Zoom call the previous day and consisted of Mr Silveira asking various questions of Mr Soh relating in particular to the relationship between HS and GSX Group. Mr Soh confirmed that the relationship was at arm’s length. He refers to Trident, Mercury and Nathan.

It is plain that in this exchange Mr Soh was referring to the business of HS as opposed to that carried on by GSX Group. Mr Silveira reverted with some more questions on 31 August 2020 which, with hindsight, unfortunately referred to the “Stacs protocol”. It is clear from Mr Soh’s response on 31 August 2020 that he took this to be a reference to HS’s development work rather than being a refence to GSX’s. He did not use the expression STACS Protocol in his reply but did refer to the STACS blockchain and to the three platforms (ie, Trident, Mercury and Nathan) as the following passage indicates:

Mr Silveira reverted to Mr Soh on 11 September 2020 and Mr Soh replied on 12 September 2020. The response mainly revolved about the fee structure being adopted by HS. The only reference to GSX is in the following passage:

The exchange then continues and indicated a concern on Mr Silveira’s part in relation to the fee structure adopted by HS which Mr Soh did not understand. It was on 22 September 2020 that the issue of STACS Tokens first arose, with the following query from Mr Silveira:

Mr Soh’s response was as follows:

On the next day, it became clear for the first time that Mr Silveira had had access to either the First or Second Whitepapers and was focusing on Section 9 which related to the STACS Token. The following exchange occurred, with Mr Soh’s response to Mr Silveira’s question italicised:

Mr Silveira responded the same day making it clear that he had also read the Third Whitepaper claiming that there was no reference in that document that the STACS Tokens were “meant to be only just for GSX native stacs token as opposed to the stacs token that drove the protocol …”. Mr Soh responded by saying “No, [HS] has never minted tokens, any “STACS” token was issued by GSX on its own native STACS and also acknowledged by GSX Group at the time.”

Matters came to a head on 23 September 2020 when Mr Soh reiterated his position, as follows:

Here it is clear that Mr Soh is himself using the expression “STACS Protocol” to refer to HS’s work, not that of GSX Group. One can see from the reply e-mail that Mr Silveira was becoming concerned about the relationship between GSX Group and HS, and was drawing no distinction between HS and H Inc when he said:

Mr Soh’s final response was as follows:

Mr Soh was cross-examined on the e-mails, particularly in relation to his statement that there had been no token issued on the STACS Protocol. Read in context however it is clear that he was referring to HS’s development work, rather than that of GSX Group as the next sentence makes clear. The relevant passage ends with the following interchange:

I have gone through this e-mail exchange in some detail because it formed an important plank in the claimants’ case that HS’s development work was in fact a development of the STACS Protocol which should have been, but was not, using STACS Tokens as the utility token for the HS products.

I do not see that the exchanges help the claimants’ case. It is unfortunate that the terms used, such as STACS Protocol and STACS Tokens, were not defined and used consistently. Equally it is unfortunate that Mr Silveira did not disclose that he was a holder of STACS Tokens and identify his concerns at the outset. Mr Soh gave evidence that he thought that Mr Silveira was a potential investor responding to a series of investor decks put out by HS to encourage investors and that he did not know that he was a STACS Token holder. Had he done so, he said he would have responded differently.

Read as a whole, I am satisfied that this was indeed the position. Mr Soh went to great lengths to deal with each point raised by Mr Silveira explaining what the HS proposals were and how they were designed to be implemented. He explained that they differed from the GSX Group’s products and that the only tokens to have been issued were those issued by the GSX Group. I see nothing sinister or underhand in what he said. He was explaining the position as he saw it with great courtesy.

The e-mail exchange does not support the assertion that the STACS Protocol was designed from the outset to operate without any STACS Tokens. The STACS Protocol was designed to use the STACS Tokens as its utility token; HS’s subsequent developments were not.

The final question therefore is whether those subsequent developments were embodiments of the STACS Protocol such that, consistent with the representations in the Third Whitepaper, they should have been designed to use the STACS Token and thus confer a benefit on the holders of STACS Tokens – which included not only Mr Silveira but also Mr Soh.

As is set out in detail in the Whitepapers the vision of the STACS Protocol was of two systems, Native STACS and Global STACS, with any institution being able to become a verified partner on staking a certain amount of STACS Tokens with transaction fees on Global STACS being converted to STACS Tokens on the open market to fulfil the distribution regime set out in Section 8.3.1.

As is stated in the Abstract in the Whitepapers:

In one of the Investor Slides put out by HS which I was told were published between August and December 2020, the functionality of HS’s then products, Mercury, Nathan and Trident were described in the following table:

In cross-examination Mr Soh sought to clarify what the difference was between the STACS Protocol promoted by GSX Group and HS’s then products. This involved a number of passages.

I shall try to draw all this evidence together. Mr Soh gave unchallenged evidence that Trident, Mercury and Nathan were front end applications. Whilst Trident and Nathan were connected to a blockchain, Mercury was not. Trident was designed to allow a user to create a bond token, Mercury was to support trade reconciliation of different pieces of information and Nathan was a structured financial product where information would be stored on a blockchain-based ledger. GSX Group had an option to purchase these products but did not take up that option. GSX Group wanted to use the STACS Protocol to run a global ecosystem which allowed staking which HS did not want to do, so there were two different blockchains with different functionalities.

The applications of HS’s products as front-end applications were such that they were not tied to any blockchain but had the ability to talk to any blockchain. They were, as Mr Soh put it, apples in contrast to GSX Group’s oranges. Hence HS’s products were designed not to operate using a proprietary token such as the STACS Token. In contrast, the whole underlying strategy of the STACS Protocol was that it should become a global enterprise based on a proprietary token, the STACS Token. When Global STACS failed to materialise, rather than move in the direction chosen by HS, it elected to seek to create utility and hence value in the STACS Token by expanding it into the GATE Token.

On the basis of the foregoing, I am satisfied that Mr Soh was correct in using the apples/oranges analogy. The STACS Protocol was designed to be a complete ecosystem driven by its reliance on the staking of STACS Tokens; Trident, Mercury and Nathan played no part in this and did not require a dedicated token. Indeed one of the driving forces behind the development was to avoid this. I therefore conclude that the HS’s products were not an embodiment of the STACS Protocol such that they should have used STACS Tokens.

The attack on the veracity of Mr Soh

A substantial attack was made in the claimants’ written closing submissions on the credibility of Mr Soh as a witness. I have considered many of the grounds of attack when reviewing the facts. Mr Soh was cross-examined at length over three days and dealt fully and patiently with the matters which were put to him. He came across as a well-informed competent businessman who understood the technology. He appeared on occasions to be perplexed as to what it was he was supposed to have done wrong as the division between his work in promoting the STACS Protocol on the one hand and the development of the HS’s products on the other was to him clear both as a matter of technology and in terms of timing.

I unhesitatingly reject any suggestion that he was not doing his best to assist the court either in his written or oral evidence. I found him to be a careful, focused and helpful witness. For the reasons given I have given weight to much of his evidence.

Conclusions on Fraudulent Misrepresentation

I have set out the five elements of the legal approach to fraudulent misrepresentation at [74] above and at [76] indicated that I would consider the first, second and fifth elements first under a number of headings.

Was HS the (or one of the) representor(s)?

The first sub-issue is whether HS was one of the representors, in the sense that it was legally liable for the representations being made in the Third Whitepaper. It cannot have been the representor in relation to the publication of the First and Second Whitepapers as they were both published before HS was incorporated. On its face the Third Whitepaper was published by H Inc as Mr Silveira accepted. Both Mr Cowan and Mr Soh gave evidence that the Third Whitepaper was published by H Inc on GSX Group’s instructions and this is consistent with the language used relating to GSX in the document. The whole emphasis is on the activity of GSX Group with H Inc being the joint venture company responsible for the STACS Protocol and GBX having responsibility for the STACS Tokens.

Mr Silveira accepted that on reading the Third Whitepaper it was GSX Group that “is speaking to [him] through this Whitepaper” and that he knew he was “dealing with the GSX Group”, though he disagreed that he would have known that the token sales were not handled by H Inc. In my view, the understanding of the informed reader would have been that it was indeed GSX Group that was speaking through the Whitepaper, and that the token sales were not handled by H Inc.

The claimants rely on five factors for contending that, notwithstanding this, HS made the representations. The question however needs to be a little more focused than this. As indicated above what one is considering is the legal liability for the making of the representations. I shall consider the five factors individually and then consider the combined effect of them.

First, they assert that HS had de facto responsibility for creating and producing the marketing materials in relation to the STACS Protocol and STACS Token. I consider that on the evidence this is an overstatement. The evidence relied upon goes no further than demonstrating that HS personnel, including Mr Soh, assisted H Inc to make the amendments to the Third Whitepaper but no amendments were made to the passages relied upon as being the source of the representations.

I do not consider that this degree of assistance could of itself render HS personally liable for representations which were originally written by GSX Group and then adopted and published by H Inc, a separate legal entity from HS, such that HS would be liable in law for the consequences of publication.

The second factor is a development of the first relating to certain comments made by Mr Soh and others in a WhatsApp group chat. Again these relate to work HS did in assisting in the preparation of marketing materials and the same comments apply.

Third, reliance is placed upon the fact that the representations were available on a website (“https://stacs.io”) which it is contended was controlled by HS, not H Inc. There is a dispute as to whether the website was actually owned by HS or by H Inc but I am satisfied on the evidence that it was controlled by HS in the sense that its employees would have effected the uploading of any given piece of material. Merely uploading another party’s material onto your website is not of itself an indication that you accept legal liability for the contents of the document.

Fourth, reliance is placed upon two matters: first, on the fact that the Third Whitepaper was “redesigned in the Signature [HS] blue colours” and secondly that HS and H Inc have been referred to in the public domain interchangeably. As to the first, the evidence reference relied upon by the claimants in paragraph 122 is a passage of transcript in Mr Cowan’s cross-examination:

However, read in context it is plain that in that passage both counsel and Mr Cowan were using the word Hashstacs to refer to H Inc.

As to the second, the claimants draw attention to the fact that HS has referred to itself as “STACS” in a number of documents. These all postdate the publication of the Third Whitepaper, the earliest being in November 2019 and the remainder in mid to late 2020. It is accepted that both H Inc and HS were referred to as STACS and this would create the possibility of confusion between them and between the products developed by HS, such as Nathan, Trident and Mercury and the STACS Protocol but I do not see how this confusion can assist me in deciding which entity or entities were legally responsible for the publication of the Third Whitepaper.

The claimants also rely upon the contention that H Inc and HS “operated interchangeably” with H Inc being the holding company while HS is the operating company. They go on to state “[t]his must therefore mean that any operating activities would have been undertaken by [HS], which also include the making of the [Third Whitepaper] and Website Representations”.

The difficulty with this broad assertion is that it fails to take into account the facts concerning the marketing of the STACS Protocol which was done under the auspices of GSX Group and that any contribution by Mr Soh was in his capacity as “Executive Director” of GSX Group, not as a director of HS. In this respect I cannot accept the assertion at para 135 that HS “(through Mr Soh) was making decisions for the GSX Group…”. On the facts, this is not so.

The fifth ground relates to the question of whether the Website Representations have ever been made. Since it is common ground that the representations in the Third Whitepaper were made I need not consider this question further.

I revert therefore to the fundamental question: is HS legally responsible for the publication of the representations in the Third Whitepaper notwithstanding the fact that its name nowhere appears on the document, that it did not authorise its publication and that its sole contribution to the drafting did not alter the wording of the representations? In substance it is asserted that the corporate veil between H Inc and HS should be lifted. In my judgment, on the facts as I have found them, the matters relied upon by the claimants fall far short of justifying this. HS was not responsible in law for the publication of the Third Whitepaper.

Were the representations in law actionable representations?

There was no material dispute as to the applicable law. It was succinctly summarised in para 133 of the defendants’ written closing submissions:

In oral closing submissions, Mr Nair referred me to the case of Meow Moy Lan and others v Exklusiv Resorts Pte Ltd and another [2021] SGHC 155 where at [60] Chua Lee Ming J said this:

The reference to De La Sala is a reference to the Court of Appeal decision in Ernest Ferdinand Perez De La Sala v Compañia De Navegación Palomar, SA and others and other appeals [2018] 1 SLR 894 (“De La Sala”) where at [172] Andrew Phang Boon Leong JA, having cited the passage from Panatron Pte Ltd and another v Lee Cheow Lee and another [2001] 2 SLR(R) 435 (“Panatron”) set out above at [74], made these observations:

Mr Nair submitted that the representations did not contain statements of fact but rather statements as to what will happen in the future or, alternatively, statements as to what the statement maker intends to do with the transaction fees generated on the STACS Protocol. Mr Leong, for the claimants, submitted that reading the Third Whitepaper as a whole it was plain that this was a statement of what the statement maker intended would happen in the future, which intention the statement maker had at the time of making the statement and hence was actionable in the second way set out in De La Sala at [172].

I consider that on the facts of this case Mr Leong is correct. In fact, I would go a little further. As indicated at [101] above, the statement as to how the transaction receipts would be distributed constituted an undertaking that they would be so distributed in the event that the STACS Protocol was successful and generated fees. It was part of the inducement for institutions to adopt the protocol and for “speculators or investors” to purchase STACS Tokens.

Accordingly had HS been responsible for the making of the representations I would have held that they were in law actionable representations.

Were the representations false at the time they were made?

This is the crux of a case based on fraudulent misrepresentation. It is a case of deceit and, as the claimants accept, cogent evidence is required for fraud to be established.

On the facts as I have found them there is no such cogent evidence in this case. There is no evidence that at the time the Third Whitepaper was published, Mr Soh, regardless of the capacity in which he was acting, held any belief other than that any transaction fees generated by operating the STACS Protocol would be distributed in accordance with the scheme set out in the Consensus Incentives section of that Whitepaper (Section 8.3.1). Indeed he was actively involved in promoting the project.

There is no evidence that, at the time HS was incorporated and the Third Whitepaper was published, he had formed the intention that HS should be used as a vehicle to deprive investors in STACS Tokens of their just rewards. No reason was suggested why he should do this when he was, through Stellar, the owner of STACS Tokens.

The work of HS in developing and seeking to market the other products was done alongside the work of GSX Group in developing and seeking to market the STACS Protocol. There was no dishonesty in this. It was one of the things H Inc and HS were set up to do. The former was not part of the latter and there was no evidence that Mr Soh ever thought that they were.

Accordingly I am satisfied that the representations did reflect the true intentions of all the Participants, namely GSX Group, GSX, GBX, H Inc and (so far as relevant) HS as to how any transaction fees would be distributed.

Whether the representations became false?

It is accepted that even if a representation was true when made but subsequently the representor alters its position so that it is no longer true, there is a duty on the representor to withdraw or modify the representation, in so far as the representation is a continuing representation.

The claimants contended in the alternative to their main submission that the representation was false from the outset that it became false at a later date when the decision was made to swap the STACS Token for the GATE Token. Setting aside the fact that this decision was made by GSX Group and not by HS, on the evidence the GATE Token was to continue to be used as the utility token of the STACS Protocol but it was to have additional uses as well. It was not suggested to Mr Cowan that in so far as transaction fees might be generated on the STACS Protocol after the swap, they would not be distributed in accordance with the representations to the holders of GATE Tokens.

There is thus no substance in the submission that the representations subsequently became false.

Did HS “know” that the representations were false at the time they were made?

It necessarily follows from the finding that the representations were not false that HS, through Mr Soh, did not know they were false. The finding that they were not false is based upon the understanding and intentions of Mr Soh at the time.

Did HS become aware that the representations had become false at a later date?

Again, this is not the case.

Were the representations made by HS with the intention that they should be acted upon by Mr Silveira or by a class of persons to which Mr Silveira belonged – namely holders of STACS Tokens?

For the reasons given at [99] above, I consider that the Third Whitepaper was not only directed to potential users of the STACS Protocol, it was also directed to the “speculators or investors” in STACS Tokens. Hence, had the representations been false, I would have held that they were made, inter alia, with the intention that they should be acted upon by investors or potential investors in STACS Tokens.

However, since I have found that HS was not legally responsible for the making of the representations, that the representations were not false, and that they were made without HS’s knowledge that they were false, the action based on fraudulent misrepresentation must fail.

I have reached this conclusion based on a consideration of the first, second and fifth elements of the cause of action as set out in Panatron (see [196]–[209], [216]–[223], and [224]–[225] above). It is not therefore necessary to deal at any length with the third and fourth elements: that Mr Silveira acted on the (false) statements and has suffered damage in consequence.

It is plain that Mr Silveira decided to invest in STACS Tokens as a result of the information he obtained from the Third Whitepaper and similar documents. He invested the equivalent of some US$72,000 in doing so. He would have known as a sophisticated investor that the return on his investment was entirely dependent on the success of the STACS Protocol, based on blockchain technology, which was recognised as being a novel and highly speculative field.

The reason Mr Silveira suffered the losses he did was not because of any fraudulent activity on the part of HS, but because the STACS Protocol did not take off to any material extent. That was a risk a cautious but sophisticated investor such as Mr Silveira would have appreciated was a very real risk. Equally he would have appreciated that the rewards if the project did take off had the potential to be significant.

Accordingly I accept that he did act on the representations but any damage suffered was not in consequence of that reliance. It was due to the lack of success of the STACS Protocol.

Issues (d) and (e): Negligent Misrepresentation and Negligent Misstatement

It is convenient to deal with these two causes of action together.

Although the parties formulated their propositions of law somewhat differently, there was little, if any, difference in substance.

The claimants’ formulation was set out in paras 78–81 of their written submissions:

The defendants’ formulation was set out in paras 95–99 of their written submissions:

Here the claimants’ case is not based on an assertion that there was any inducement to enter a contract with HS. The appropriate approach to negligent misrepresentation is thus that set out in para 78 of the claimants’ formulation and that in para 97 of the defendants’.

Both require that there is a false representation of fact by the defendant as opposed to a prediction about the future. This is the same distinction as exists in the case of fraudulent misrepresentation and the findings of fact made above are equally applicable and determinative.

Whilst there might have been an actionable representation with regard to the representations, they were not made by HS and they were not false. On this basis the action in negligent misrepresentation cannot succeed.

Further, whilst I accept that potential investors in STACS Tokens constituted a class of people to whom the Whitepapers were addressed, on the facts as found any duty towards that class was not owed by HS as it did not make the representations and, in any event, it was not in breach of any such duty.

The position with regard to negligent misstatement is no different. The misstatement is said to reside out of the wording of the Consensus Incentives in Section 8.3.1. The wording was chosen by Mr Cowan on behalf of GSX Group in the earlier Whitepapers and was adopted by H Inc in the Third Whitepaper. It was a true statement of those parties’ intentions. Further, there was no special relationship between the claimants and HS nor had HS assumed a special responsibility to the claimants.

Issue (f): Unjust Enrichment

A claim in unjust enrichment is raised against both defendants. The principles applicable are correctly summarised in para 83 of the claimants’ written submissions:

Both defendants submit that the claim should be rejected primarily on the first ground: that neither of them has been enriched by any transaction fees generated on the STACS Protocol.

So far as concerns HS, it disclosed its audited financial statements and general ledgers from its inception. Mr Soh gave evidence based on those records that HS had not received any STACS Protocol transaction fees.

During the course of the disclosure process, the claimants made extensive requests for disclosure of specific documents. These were considered at hearings on 11 January 2024 and 12 June 2024. The defendants’ position in respect of a number of the categories of documents, particularly those relating to HS’s dealings in the STACS Protocol, was that it has never had such documents since it played no part in the operation of the STACS Protocol.

At the hearing on 11 January 2024, Mr Soh was ordered to provide a witness statement in respect of certain relevant documents which were said never to have been or were no longer in the possession, custody or control of either of the defendants. This resulted in a witness statement dated 25 January 2024. In it Mr Soh stated that HS did not receive any transaction fees in relation to usage of the STACS Protocol, that, other than documents already produced, the defendants had no documents relating to the swap of STACS Tokens for GATE Tokens and that HS had never paid any dividends.

There was then a further application for disclosure by the claimants in relation to which Mr Soh provided a further witness statement dated 31 May 2024. Again Mr Soh reiterated that the defendants did not develop the STACS Protocol nor procured the STACS Token for GATE Token swap nor received any transaction fees from the STACS Protocol.

Mr Soh was cross-examined on this evidence. He explained that the accounts of HS were the subject of an external audit and he dealt clearly with all the questions put to him on the contents of the documents. He rejected, correctly in my view, the suggestion by Mr Leong that the ledgers could not be relied upon to support the assertion that HS had received no transaction fees on the STACS Protocol. The evidence of Mr Soh which I have accepted provides cogent reasons for why the ledgers are in the form they are and I am satisfied that they represent a true record of the financial position of HS at any given time. In consequence I hold that HS was not enriched by the receipt of any transaction fees generated by the use of the STACS Protocol.

The position of Mr Soh is even more stark. There is no evidence to support any assertion that he received any STACS Protocol transaction fees or any benefit derived therefrom. HS paid no dividends. Stellar, in which Mr Soh had an interest of around 51%, itself held around 53m GATE Tokens and there was no evidence that it had received any transaction fees. The last passage of cross-examination ended as follows:

The claim based on unjust enrichment therefore fails.

Issue (g): Conspiracy

It is alleged that Mr Soh and HS conspired to cause damage to the claimants. The claimants’ case is based both upon lawful means and unlawful means conspiracy.

The claimants accept that a necessary element of lawful means conspiracy is that a predominant intention of the conspiracy must be to cause damage to the claimant. On the facts as found, there was no such intention on the part either of HS or Mr Soh to cause damage to Mr Silveira specifically or to the class of persons, being STACS/ROCK Token holders, to which he belonged. The suggestion that HS and Mr Soh conspired together to cause damage to such holders, which included Stellar, is somewhat fanciful.

The case law on the circumstances in which a director can be liable in unlawful conspiracy with the company of which he is a director when he was acting in his capacity as a director is complex. This is particularly so where the alleged unlawful means is a tort rather than involving a breach of contract between the company and a third party. No contract is involved in this case.

I was referred to Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd [2009] 2 SLR(R) 318, Nagase Singapore Pte Ltd v Ching Kai Huat and others [2008] 1 SLR(R) 80 and PT Sandipala Arthaputra and others v STMicroelectronics Asia Pacific Pte Ltd and others [2018] 1 SLR 818 (“Sandipala”) as well as the well-known English case of Said v Butt [1920] 3 KB 497 (“Said v Butt”).

The effect of these cases was drawn together comprehensively by Steven Chong JA in paragraphs [51]–[79] of Sandipala. However, on the question of whether the principle in Said v Butt applied in cases where the director had allegedly conspired with the company’s commission of a tort (such as deceit) he concluded as follows at [79]:

In the present case, it is not alleged that Mr Soh is personally liable for the torts allegedly committed by HS; it is said that he conspired with HS for HS to commit them. In his oral submissions Mr Leong accepted that it was an essential integer of liability that Mr Soh knew or was reckless to the fact that the representations were false. Where, as here, I have held that the representations were not false and that HS did not intend to cause damage to the claimants, the allegation of conspiracy by unlawful means must necessarily also fail.

Hence, although the matter was argued at length before me, I do not find it necessary to reach any conclusion on the legal issue.

Issue (h): Assessment of damages

With hindsight I regret not ordering bifurcation of the issues of liability and damage. This was considered at the hearing of the application for further disclosure in June 2024 when the claimants were seeking an adjournment of the trial through lack of disclosure and the defendants were contending that, in so far as they had access to relevant documents, these had been disclosed.

The defendants were insistent that the trial should not be adjourned as, understandably, they wished the allegations of fraud to be resolved without further delay. Since I was satisfied that such relevant documents as the defendants had would be available in time for the trial to proceed on both issues I declined to adjourn it and did not order bifurcation.

This necessarily meant that the experts had to prepare their reports on the basis of the limited material available to them. As matters have turned out, this was due to the fact that the STACS Protocol was the responsibility of GSX Group and not HS. It was not due to any underhand behaviour on the part of either defendant. In so far as the STACS Protocol may have generated transaction fees, these would be recorded in the records of GSX Group.

The experts were thus faced with making their assessments on the basis of a number of assumptions and it is not surprising that they reached very different conclusions.

The underlying position now that the facts have been found is that the STACS Protocol was implemented by GSX Group and that it did not prove possible to implement it in the manner anticipated in the Whitepapers. It was one of many blockchain projects which failed to take off. Any loss that Mr Silveira has suffered cannot be laid at the defendants’ door.

Issues (a) and (b): the Trust Issue and the STACS Token T&Cs Issue

It is convenient to consider these two issues together as they are interrelated.

Mr Silveira was not the owner of the original ROCK Tokens and thus did not receive the notifications which owners of ROCK Tokens received in late 2018. These included the STACS Token T&Cs. Mr Silveira purchased his STACS Tokens around a year later between August and December 2019 on the open market from the Gibraltar Stock Exchange and from the Quoine trading platform in Singapore.

Mr Silveira contends that he transferred the tokens to Munchetty on 9 September 2020 and that the effect of the transfer was that Munchetty held the tokens on trust for Mr Silveira so that he remains the beneficial owner thereof.

The defendants contend that the transfer to Munchetty was by way of a capital injection by Mr Silveira and that the tokens are therefore held by Munchetty absolutely. Hence Mr Silveira is not the beneficial owner and therefore does not have title to sue in his own name.

The defendants also contend that Mr Silveira does not have standing to sue because although he bought on the open market he was bound by the STACS Token T&Cs which were at the relevant time available on the GBX website.

Further, if Mr Silveira was bound by the T&Cs, the defendants contend that the claimants’ claims against the defendants are, in any event, precluded by virtue of clauses 13 and 15 of the T&Cs.

These raise difficult questions and on further consideration I am not satisfied that they have been adequately ventilated by the parties for me to reach a reasoned decision. Had it been necessary to reach a conclusion I would have asked the parties to address me at a further hearing. However this is not necessary on the facts as found and I decline to do so.

Conclusion

Should any other issue arise, it should be addressed in the written submissions.