What’s the Deal with ICO Advisory Firm DigitalX?

DigitalX is an ICO and blockchain advisory service, but this wasn’t always the case. The Australian firm seems to have had more ups and downs over its lifetime than the value of Bitcoin. Most recently, DigitalX hit the headlines because of a legal dispute involving investments in one of its ICO advisory clients.

So what’s the deal with DigitalX?

The Convoluted History of DigitalX

DigitalX shares are publicly traded on the Australian Stock Exchange (ASX). Today, the company provides ICO and blockchain advisory services, which the website states draw on the team’s previous four years experience in the cryptocurrency and blockchain application space. However, the ASX website company entry shows that DigitalX was first registered all the way back in 1989 before Bitcoin was even a twinkle in the eye of Satoshi.

The company registered in 1989 was Macro Energy, an oil and gas company. The company that eventually evolved into DigitalX formed in 2013. At that time, it was a Perth-based bitcoin trading and mining company called DigitalBTC. Australian entrepreneurs Zhenya Tsvetnenko, Alex Karis, and William Brindise were all co-founders.

By 2014, Macro Energy was on its knees, so the company underwent a reverse takeover with DigitalBTC. The latter had raised more than $8m to fund the acquisition and its own subsequent expansion. After the first quarter of trading, DigitalBTC had posted an underlying profit of $600k. Although, this profit was more than swallowed up by the $11.1m losses incurred as a result of accounting and legal fees from the reverse takeover.

A little over a year later in October 2015, the company decided to ditch bitcoin mining, focus on application development, and rebrand to DigitalX. These changes came after the company had raised a further $3.5m to develop a peer-to-peer, cross-currency payment application called AirPocket, to launch in Latin America.

Co-Founder Scandal

Events surrounding DigitalX co-founder Zhenya Tsvetnenko dominated the company news in 2016. Born to Russian biochemists and having dropped out of university, Tsvetnenko won Western Australia’s “1st Among Equals” 40under40 award in 2011 for his entrepreneurial efforts. He was a local celebrity, known together with his wife for their excessive spending habits, having dropped $1m on their 2008 wedding and flown out to Hollywood for her 29th birthday to be photographed with the likes of Snoop Dogg.

Zhenya Tsvetnenko (Image from Twitter profile)

By mid-2016, though, the US Department of Justice had issued an indictment against Tsvetnenko. He stood accused of involvement in a fraud scheme, linked to one of his other ventures outside of DigitalX. The allegations said he had misled or deceived customers by auto-subscribing them to an SMS dating service. Three days later, Tsvetnenko resigned from his post with DigitalX.

By the end of 2016, DigitalX had yet to post any profits, and the two remaining co-founders of DigitalX had also stepped down. Leigh Travers, who was previously Chairman, moved into the role of CEO amidst a broader management shake-up. Travers is still in the CEO post today. It emerged in December 2017 that a New York Jury had convicted Tsvetnenko’s business partner Darcy Wedd over the SMS scam. As things stand, Tsvetnenko has had no extradition proceedings brought against him. 

DigitalX CEO Leigh Travers (Image from Twitter profile)

DigitalX Today

At some point between 2016 and 2017, DigitalX stopped focusing on app development. Although, the AirPocket site remains active. Today, the DigitalX website describes the company focus as on ICO advisory and blockchain consulting services.

On the ICO side, DigitalX offers corporate and investment advisory, tech due diligence and consulting, and marketing services. The client list boasts some pretty high-profile ICO’s such as SingularityNET and PowerLedger. On the blockchain advisory side, DigitalX offers a wide range of services linked to the development of blockchain solutions. DigitalX worked with Bankera in the building of its digital banking platform. 

In September this year, the company disclosed that it was being sued by a group of parties who had made investments in an ICO on which DigitalX had advised. Later, it emerged that the client in question is Shivom, an Indian healthcare/genomics project. The litigating parties claim they bought the OMX tokens under false pretenses, which DigitalX strongly refutes. The courts have since called all parties into mediation, but the dispute is ongoing.

Investing in DigitalX

As DigitalX is a publicly funded company, anyone can buy its shares on the Australian Stock Exchange. Because of its close ties to the cryptocurrency world, the share price tends to fluctuate with the value of Bitcoin. However, also because DigitalX is tied to the cryptocurrency community, it appears to attract close scrutiny from the ASX, which has asked the company more than once to comment on whether or not extreme price increases are linked to insider trading. DigitalX confirms that no such activities have taken place.

Like the price of Bitcoin, the share price of DigitalX has fallen throughout 2018. However, the legal dispute over Shivom dealt a heavy blow to the share price, which has halved between the end of August and the time of writing. Perhaps it will recover if the legal action fails or settles without significantly damaging the company’s bottom line. However, if the legal action succeeds, it’ll be a severe reputational blow. Especially to a company that has already shifted strategic focus twice in the last four years.

Summary

DigitalX has a stormy past, and in the present moment, the company is continuing to navigate choppy waters. On the other hand, DigitalX can boast that it’s a public company operating under the eye of the ASX. This is still rare in the world of crypto. Whether or not you may see them as a suitable investment opportunity depends on your appetite for risk. As with all investments, crypto or not, make sure you do your homework before you put your money in.