Bitstamp founder sues the crypto exchange's owners in boardroom battle

Nejc Kodrič is suing the new owners of Bitstamp, the crypto exchange he founded a decade ago.

The lawsuit was filed in the High Court of Justice in the United Kingdom on August 12. It concerns a call option exercised on July 21 by Bitstamp Holdings NV that would see the investment vehicle acquire Kodrič’s remaining shares in Bitstamp for $13.46 million — a price he claims is “very significantly lower than the present value of the shares.”

Kodrič already sold two-thirds of his shares in Bitstamp when the company was acquired by Belgium-based investment firm NXMH, a subsidiary of South Korea’s NXC Corporation, in October 2018. But he retained a 9.8% stake and stayed on as CEO until October 2020.

His lawsuit reveals that, following the acquisition, Bitstamp laid plans to pursue a valuation of $1 billion through an initial public offering. It also contains details of how Kodrič was replaced as CEO and later denied the chance to take on the role of chairman.

“Bitstamp’s two major shareholders – NXMH and Nejc Kodrič – have a private shareholder matter which is being worked through,” said Julian Sawyer, who took over as Bitstamp’s new CEO in July 2020 after a brief spell at Gemini Europe. “As a major player in the crypto world these types of discussions often reach the public arena.” 

A spokesperson for NXMH reiterated Sawyer's stance and declined to comment further. Kodrič did not respond to requests for comment. 

A big call

When NXMH acquired 80% of the shares in Bitstamp in 2018, Kodrič’s fellow Slovenian and co-founder Damian Merlak sold all of his shares in the company and ceased to be a director.

But Kodrič stayed on as CEO and ultimately transferred his shares to White Whale Capital, a Luxembourg-based family office, in September 2019.  

As part of the acquisition, Kodrič and Bitstamp’s new owners arranged options agreements that gave both parties a way to trigger the sale of his remaining shares to NXMH in specified windows in 2020, 2021 and 2022.

Following the acquisition, Bitstamp wasted no time pursuing further fundraising. The claim details how Kodrič and Hendrik Ghys, who was appointed to Bitstamp’s board by NXMH, travelled to New York together in May 2019 to meet with investment banks about raising capital at a valuation of $1 billion.

The trip set alarm bells ringing for Kodrič, who feared the valuation could lead NXMH to exercise its call option and acquire his remaining shares relatively cheaply.

His concerns were compounded when, at a strategy meeting at the Hotel Le Royal in Luxembourg on December 16, 2019, Ghys and NXMH’s other board representative Jong Hyun (Jamie) Hong unveiled plans to target an IPO at a $1 billion valuation within three years, according to the lawsuit.

At both junctures, Kodrič claims to have sought assurances from NXMH and its board appointees that the call option would not be exercised. Indeed, he claims to have made that a condition of lending his support to the company’s IPO drive. He further claims that Ghys and Hong gave him those assurances in “clear and unequivocal terms.”

Succession planning

In September 2019, before the IPO plan had been unveiled, NXMH told Kodrič that he may no longer be suitable as Bitstamp’s CEO. According to the claim, this was based on his lack of experience running a larger company.

NXMH’s representatives suggested Kodrič might instead accede to the role of chairman – a prospect Kodrič claims to have been interested in.

Soon after, relations between Bitstamp’s founder and its new owners began to sour. Kodrič's lawsuit claims that in November 2019, Hong “effectively hijacked a two-day strategy workshop arranged for Bitstamp’s management concerning the future of the company.”

“This was highly counterproductive. Mr Hong adopted a hostile and domineering approach that served to alienate Mr Kodrič and the rest of Bitstamp’s management,” it continues. The episode prompted Kodrič to tender his resignation as CEO on the second day of the workshop, but this was rejected by Hong, according to the claim. 

Matters are said to have come to a head in May 2020, when Hong informed Kodrič that NXMH did not want him to take on the role of chairman. In late June, Kodrič stepped down as CEO, paving the way for Sawyer to take over. Kodrič, who remains a director, claims to have thrown his support behind his successor. Ghys ultimately became chairman of the company, according to Bitstamp's website. 

In July, NXMH attempted to exercise its call option over Kodrič’s remaining shares in Bitstamp, held by White Whale Capital, at a price of $938 per share – equating to around $13.46 million.

“This is very significantly lower than the present value of the shares calculated by reference to the actual value of Bitstamp and its business based on its market-facing valuation and even lower than the potential future value of the shares, both generally and particularly in the event of a successful pursuit of Bitstamp’s IPO strategy,” the lawsuit states.

Kodrič claims the option is both invalid and unenforceable and is seeking an injunction preventing NXMH from forcing through a transfer of the shares.

It is not clear how much progress Bitstamp has made towards an IPO. Sawyer told The Block that the company is focused on “delivering the most secure exchange in the world with the best products and services.” 

“We have ambitious plans and exciting strategy for the next 10 years of our business,” he added.

Update: This story was updated on August 31 to make it clear that Kodrič is suing the NXMH vehicle that holds the majority of the shares in Bitstamp.