Australian cryptocurrency Horizon State collapses under lawsuit from founder Oren Alazraki

The sun has gone down on Australian cryptocurrency project Horizon State.

Horizon State, an Australian blockchain voting platform, has abruptly collapsed as the team behind it has decided to shut down the project. The announcement was first made in the Horizon State Telegram group.

Prices of the Horizon State token (HST) collapsed correspondingly, dropping 50% as the news broke, and going from 99.5% below its all time high to 99.75% below its all time high.

The gist of the announcement is that there's a legal case against Horizon State and the cost of defending against it would bankrupt the company.

The announcement reads:

What's the lawsuit about?

Initially it was theorised that regulatory concerns caught up to Horizon State following its relatively restrained $1.4 million ICO in 2017. But since then it's emerged that there is a case being brought against Horizon State by former CEO Oren Alazraki, according to court filings.

The crux of the case appears to be an alleged breach of terms and conditions by Horizon State under Fair Work.

Out of nowhere

The collapse comes shortly after Horizon State was nominated for an Australian "Blockies" award, and just days after it announced the appointment of since-departed founder Jamie Skella as an adviser to the project.

These moves suggest that the collapse and lawsuit came as a genuine surprise to Horizon State, Skella notes.

I didn’t return to the company; I joined their new advisory board. Of course, it makes little sense to form a team of advisors, only to shutter the company days later, so I can only assume this outcome was abrupt and genuinely unexpected by Andy and Nimo.

— Jamie Skella (@JamieSkella) August 19, 2019

Others are more suspicious and point at factors such as the token price drop prior to the announcement as evidence of foul play.

In the end, the way some people regarded HST as an investment rather than a functional product, may serve as an example of the issues that can arise when mixing cryptocurrency with traditional business models that demand revenue.

Opinion: Mixing business and pleasure

At its heart, Horizon State was a decision-making service. Its customers are the companies, governments and other institutions that want to pop open a can of democracy for the purposes of making a transparent and fair decision.

The goal of Horizon State as a business was to attract these paying customers, who could either pay with their own HST tokens or pay with local currency for Horizon State to make the purchase on their behalf.

An influx of customers would then allow the HST token to enter the system in various ways, and some token consumption was required in order to participate in the decision-making process or launch a decision. According to a Horizon State article published just weeks before the collapse, the tokens entering the system would be variously burnt, seeded among communities and generally worked around the place.

Some of the potential issues with this model, which commentators and Horizon State have gone back on at various points, include:

• That the token isn't strictly necessary to the operation of Horizon State. The same business model could exist without having its own token.
• The fair value of the token would naturally trend to zero if all customers pay with fiat currency, as it would eventually lead to the consolidation of HST tokens in the possession of Horizon State.
• The core decision-making service that Horizon State provides could theoretically be replicated with a series of smart contracts, letting organisations DIY their own votes.

Hindsight is obviously 20/20, but these days it's relatively easy to look at the HST ICO through the lens of a security sale. The token may not have been strictly necessary in the strictest sense of the word, and the funds raised were used to build the company so it could eventually release a revenue-generating product. And if the ICO tokens were purchased by someone who genuinely intended to use the product as intended, it would be to the detriment of Horizon State's future revenue.

The situation has echoes of the concerns the ASX raised around existing companies issuing tokens, and how token sales can risk undermining a company's viability.

Horizon State may have met an abrupt and premature end, but as a product of cryptocurrency's awkward in-between years, it's likely the sun would have set on it someday.

Horizon State is survived by several dozen angry token holders, and its mildly-tarnished but undeniably cool name could be up for grabs soon.

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Disclosure: The author holds BNB, BTC at the time of writing.

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