Allysian Sciences execs sued for $50 million in crypto fraud
Allysian Sciences co-founders Apolo Ohno and Rod Jao have been sued in California.
The civil lawsuit alleges Ohno, Jao and two other defendants ran a $50 million crypto token scam.
Plaintiffs in the August 13th filed suit are
- Brian Kang;
- Skyblock LLC;
- Mid-Wilshire Consulting;
- Prasad Hurra;
- David Kim;
- Blue Block Group;
- Artemio Verduzo;
- David Kwon; and
- Young Jae Kwon
Named defendants are
- Hybrid Trade Limited;
- Asia Digital Asset Exchange;
- Allysian Sciences;
- Apolo Ohno, a resident of California;
- Rod Jao, a resident of Vancouver, Canada;
- Eugenio Pugliese, a resident of California; and
- Henry Liu, a (former?) resident of California
As alleged by the Planitffs;
Between approximately January 2018 and June 6, 2018, Defendants offered and sold digital tokens (the “Hybrid Token”), raising approximately $50 million from investors based around the world, including within the United States.
If you’ve never heard of Hybrid Token, you’re not alone.
BehindMLM reviewed Allysian Sciences in March 2015.
Finding a seemingly overpriced supplement and autoship recruitment scheme, needless to say we weren’t impressed.
Fast-forward thee years and, just after the 2017 bitcoin pump and dump, Apolo Ohno and his co-defendants, like so many crypto bros at the time, figured they’d have a crack at bEiNg ThE nExT bItCoIn!
Cue HybridToken’s ICO launch on or around January 2018.
As alleged in the lawsuit, the Hybrid group of companies were made up of the following components:
- BaseTrade – crypto trading platform
- HybridExchange – crypto exchange
- HybridTerminal – API platform for BaseTrade and HybridTerminal (announced but never released)
- HybridWallet – ethereum based crypto wallet
- HybridFX – shitcoin factory platform
- HybridToken – ERC-20 token created by defendants through HybridBlock
These companies were run through shell entities set up in Hong Kong, Malta and Singapore.
During the ICO phase, Ohno and his co-defendants solicited around $50 million in investment.
Hybrid was pitched to investors on the premise the company had
former Olympic champions, investment bankers, Wall Street quants, and Whitehouse [sic] officials forming our core team.
“We are poised and ready to bring our society into a new era of global freedom.”
The White Paper 1.9.2 claimed to have “assembled a team comprised of experienced trading system professionals from both the cryptocurrency industry and non-crypto Wall Street markets.”
The company also claimed to have
longstanding relationships with multiple governments and industry regulators, including the Philippines, Malaysia, Labuan, Singapore, Hong Kong, Korea, Taiwan, and provincial governments of large cities in China.
With the exception of Ohno being a former Olympic gold medalist, as far as I can tell the rest of the claims were baloney.
The Plaintiffs allege none of the Hybrid companies had any bank accounts. Solicited funds were thus stored in Allysian Sciences’ accounts.
On the whole nothing much happened development wise throughout the first half of 2018.
Then, in July 2018, Hybex IO was launched.
A cursory review of the code underpinning Hybex IO revealed that, contrary to Defendants’ representations that Hybrid was designing a new, novel, and groundbreaking platform, Hybex IO was instead a so-called “white label exchange” purchased from software company AlphaPoint.
AlphaPoint describes itself thusly: “AlphaPoint is a white-label software company powering crypto exchanges worldwide.”
In August 2018, 11,000 ETH, then worth around $4.4 million, was purportedly stolen from one of Hybrid’s wallets.
Defendants did nothing in response to the Breach.
Indeed, Defendants neither disclosed the breach to insiders or investors, nor took any affirmative action to investigate the Breach or recover the approximately 11,000 ETH in cryptocurrency purportedly stolen in the Breach.
Hybrid’s investors only found out about the breach following a “what’s going on?” enquiry from Brian Kang in September 2018.
After Mr. Kang made numerous inquiries concerning Hybrid’s business operations and plans, Pugliese informed Mr. Kang of the Breach.
Kang “insisted” Hybrid respond to the breach, prompting them to retain CipherBlade.
On its website, CipherBlade claims to be a “blockchain investigation company”.
On March 9, 2019, CipherBlade published a report entitled Blockchain Analysis of HybridBlock Breached Funds.
The CipherBlade Report highlights Defendants’ refusal to assist and attempts to impede CipherBlade’s investigation of the Breach, including by
(i) failing to provide certain backup devices;
(ii) failing to provide complete screenshots, chat logs, and login histories of suspect accounts; and
(iii) failing to timely prepare and provide an incident report for the Breach, and belatedly providing an incomplete and misleading incident report for the Breach.
The CipherBlade Report further explained that Defendants
(i) failed to conduct appropriate General Data Protection Regulation (“GDPR”) actions in response to the Breach;
(ii) failed to notify investors of the Breach; (and)
(iii) failed to notify law enforcement of the Breach.
In addition, the CipherBlade Report noted that certain Hybrid employees informed CipherBlade that, in reckless disregard of proper security protocols, and in direct contradiction of its representation in the White Papers,
Hybrid stored approximately $20,000,000 of investor funds in TUSD, on a wallet on a computer.
Finally, the CipherBlade reported noted that Hybrid had “very little to show” for the approximately $50 million in investor funds raised.
From mid 2018 to May 2019, again nothing much on the development side happened.
The Plaintiffs allege that during this time,
Hybrid transferred substantial portions of the $50 million to Allysian, purportedly for various disclosed and undisclosed products and services.
Upon information and belief, that money was ultimately funneled to Ohno, Jao, Pugliese, and Liu individually.
When the time finally came to exit-scam, Ohno and Jao created Asia Digital Asset Exchange (ADAX).
ADAX was a shell company set up in Cyprus.
As Defendants had planned all along, in or about May 2019, ADAX … acquired Hybrid in full or in part.
Although they’d just “purchased” their own company from themselves, Ohno and Jao sent Hybrid investors the following email;
“[W]e are extremely excited to announce that portions of HybridBlock’s ecosystem have been acquired by Asia Digital Asset Exchange (ADAX) – a fully licensed asset backed token issuance and exchange platform in Asia.
BaseTrade, our fiat to cryptocurrency platform, some of the HybridBlock team, and HybridBlock Token (HYB) will all be integrated into ADAX in the coming months.
[O]nce integration is complete, HybridBlock will discontinue separate exchange services,” and that “ADAX is the new home for HybridBlock!
And of course right after that announcement was pushed out;
Defendants began to deactivate, disable, and otherwise remove from various websites, forums, chat rooms, and social media accounts any and all evidence of Defendants’ involvement in Hybrid and the offer and sale of Hybrid Tokens.
Today none of the Hybrid companies or ADAX exist.
Defendants misled and duped their investors, ultimately delivering on none of their commitments to investors.
“Thanks for your $50 mill. We’ll be going now, buh-bye!”
The Plaintiffs allege that after soliciting “approximately $50 million” of investment during HybridToken’s ICO, Ohno and his crypto bro co-defendants
squandered and/or misappropriated, and purported to lose by theft, all or nearly all of the approximately $50 million raised through their offer and sale of Hybrid Tokens. Defendants’ offer and sale of Hybrid Tokens was, in actuality, a mere vessel for Defendants’ personal enrichment.
What’s interesting is that Hybrid Trade was soliciting investment from US residents.
Kang, a resident of California, invested $1.4 million into Ohno’s Hybrid Token ICO.
In a 2018 interview with Fox Business, Ohno, wary of regulation by the SEC, categorically stated “we’re not accepting any U.S. money into our ICO”.
To that end neither Ohno, any of his co-defendants or Hybrid Trade were at any time registered with the SEC.
And such to the extent Ohno and his co-defendants might deny knowingly pitching and soliciting investment from US residents, the lawsuit includes documented evidence to the contrary;
The rest of the Plaintiffs were all US residents at the time of solicitation.
- Prasad Hurra (Indian citizen residing in the US), invested and lost $100,000
- David Kim (US citizen and resident), invested and lost $70,000
- Artemio Verduzo (Mexican citizen residing in the US), invested and lost $53,020
- David Kwon (US citizen and resident), invested and lost $250,000
- Young Jae Kwon (US citizen and resident), invested and lost $250,000
In their complaint the Plaintiffs put forth that HybridToken was a security they were conned into investing in.
Plaintiffs invested cryptocurrency and fiat currency in order to receive Hybrid Tokens, which they were conditioned to expect would be worth more than their initial cryptocurrency investments.
Causes of action raised against the Defendants include:
- sale of unregistered securities;
- control person liability;
- securities fraud;
- intentional misrepresentation;
- negligent misrepresentation;
- breach of contract;
- breach of implied covenant of good faith & fair dealing;
- money had and received;
- promissory fraud;
- unjust enrichment;
- fraudulent conveyance;
- unfair competition; and
Plaintiffs seek damages, pre and post judgment interest and legal costs.
Curious as to what the Plaintiffs were up to these days, I ran a quick search.
As previously stated, none of the Hybrid group companies or ADAX exist. They were all shut down as part of Hybrid’s “sorry for your loss” exit-scam.
Allysian Sciences is still operating as an MLM company.
Apolo Ohno is living it up on social media.
Credited as an “angel investor”, Ohno has invested in Brrrn.
(Ohno) invested in Brrrn, a New York City–based cold workout program, to help the brand launch its first direct-to-consumer product and at-home workout platform.
Whether the funds Ohno invested are investor funds stolen through the Hybrid companies is unclear.
Rod Jao abandoned his social media profiles in 2016. He’s continued to run Allysian Sciences as CEO and kept a relatively low profile.
Eugenio Pugliese (right), convicted of drug trafficking in 2001, had a history of MLM prior to Allysian Sciences.
Pugliese still works as Allysian Sciences’ Global Managing Director.
Henry Liu seems to have dicked off to the Cayman Islands:
He continues to run crypto schemes as co-founder of Frax Finance.
Frax is the world’s first fractional-algorithmic stablecoin.
The Frax Protocol introduced the world to the concept of a cryptocurrency being partially backed by collateral and partially stabilized algorithmically.
That’s crypto bullshit for “we developed a trading app”.
Although the Hybrid group of companies themselves weren’t an MLM offering, we have in interest in the case through Allysian Sciences.
Stay tuned for updates as I continue to monitor the case docket.
Update 1st December 2021 – Apolo Ohno has filed a motion to dismiss. A hearing on the motion has been scheduled for January 10th.
Update 22nd February 2022 – Apolo Ohno’s motion has prevailed, resulting in the lawsuit being dismissed on February 15th.