You are on page 1of 17

Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 1 of 17 PageID #: 1

UNITED STATES DISTRICT COURT


DISTRICT OF DELAWARE

JOHN WINFIELD, an individual,

Plaintiff, Case No.:


vs.
COMPLAINT
ELOXX PHARMACEUTICALS, INC., a
DEMAND FOR JURY TRIAL
Delaware corporation, DAVID RECTOR, an
individual, JAMES SCHMIDT, an
individual, BARRY HONIG, an individual,
and DOES 1-10, inclusive,

Defendant(s)

Plaintiff John Winfield (“Mr. Winfield” or “Plaintiff”), by and through his

undersigned attorneys, alleges as follows for his Complaint against Defendants:

PARTIES

1. Plaintiff is an individual residing in Los Angeles County. Plaintiff is currently the

owner of 40,000 shares of common stock of Defendant Eloxx Pharmaceuticals, Inc. (“Eloxx” or

the “Company”).

2. On information and belief, Defendant Eloxx is a Delaware corporation formerly

known as Sevion Therapeutics, Inc. On information and belief, the Company’s principal

executive offices are currently located at 950 Winter Street, Waltham, MA.

3. On information and belief, Defendant David Rector (“Rector”) is an individual

residing in or around Contra Costa County, California. During the period relevant to this action,

Rector served as the interim Chief Executive Officer of the Company.

4. On information and belief, James Schmidt (“Schmidt”) is an individual residing in

or around Contra Costa County, California. During the period relevant to this action, Schmidt

served as the interim Chief Financial Officer of the Company.


Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 2 of 17 PageID #: 2

5. On information and belief, Defendant Barry Honig (“Honig”) is an individual

residing in Miami-Dade County, Florida. On information and belief, during the period relevant to

this action, Honig was an investor in the Company and directed or otherwise exercised control

over Rector’s actions as an officer of the Company.

JURISDICTION AND VENUE

6. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 because

this action arises under the Constitution, laws, or treaties of the United States. This Court has

supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a) over the common law claims asserted

in this action.

7. Venue is proper in this district in accordance with 28 U.S.C.§ 1391(b)(2) because

the Company is incorporated in this district and a substantial part of the events or omissions by

the individual defendants that gave rise to the claims occurred while those individuals were

acting as agents of the Company.

SUBSTANTIVE ALLEGATIONS

8. In or around July 2016, Plaintiff purchased 200 shares of Series A convertible

preferred stock in the Company (the “Series A Preferred Stock”). Pursuant to existing terms, the

Series A Preferred Stock was convertible into 266,666 shares of common stock of the Company

on terms agreed upon when Plaintiff purchased the shares.

9. On or about January 28, 2017, Rector, the then CEO of the Company, and Honig,

a purportedly independent investor, contacted Plaintiff regarding his Series A Preferred Stock.

Honig and Rector represented to Plaintiff that the Company was low on capital and required new

financing. Honig and Rector represented that it was necessary to convert Plaintiff’s Series A

2
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 3 of 17 PageID #: 3

Preferred Stock into common stock of the Company so that the Company could obtain the new

financing it needed.

10. In order to induce Plaintiff to convert, Rector offered to convert Plaintiff’s

Series A Preferred Stock at a more favorable price of $0.25 per share, which would result in the

issuance of not 266,666 common shares, but 800,000 shares of common stock to Plaintiff – three

times as many common shares. Plaintiff made clear to Honig and Rector that he would agree to

convert only if the Company (1) granted him most-favored-nations status with respect to the

conversion price by notifying Plaintiff of any offer to another investor to convert Series A

preferred stock at a lower price, and (2) granted to Plaintiff the right to also convert at the lower

price (even retroactively). Honig and Rector agreed to give Plaintiff MFN status, and agreed that

Plaintiff would receive the benefit of the lowest conversion price offered to any other investor,

even if the other investors converted after Plaintiff.

11. In or around January 2017, Rector sent to Plaintiff a form Preferred Stock

Exchange Agreement. The Preferred Stock Exchange Agreement provided, inter alia, for the

exchange of Plaintiff’s Series A Preferred Stock for shares of common stock at a conversion

price of $0.25 per share (the “Preferred Stock Exchange Agreement”).

12. Among other things, in Section 2.2(g) of the Preferred Stock Exchange

Agreement, the Company represented, warranted, covenanted, and agreed as follows:

The Company hereby represents and warrants as of the date hereof


and covenants and agrees from and after the date hereof that none of
the terms offered to any person with respect to any consent, release,
amendment, settlement or waiver relating to the terms, conditions
and transactions contemplated hereby (each a “Settlement
Document”), is or will be more favorable to such person than those
of the Holder and this Agreement. If, and whenever on or after the
date hereof, the Company enters into a Settlement Document, then
(i) the Company shall provide notice thereof to the Holder
immediately following the occurrence thereof and (ii) the terms and

3
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 4 of 17 PageID #: 4

conditions of this Agreement shall be, without any further action by


the Holder or the Company, automatically amended and modified in
an economically and legally equivalent manner such that the Holder
shall receive the benefit of the more favorable terms and/or
conditions (as the case may be). . . .

13. In reliance upon the representations, warranties, covenants, and agreements made

by Rector, Honig, and the Company during various telephone calls and in the Preferred Stock

Exchange Agreement, on or about January 18, 2017, Plaintiff executed the Preferred Stock

Exchange Agreement. Pursuant to the terms of the Preferred Stock Exchange Agreement, the

conversion, however, would not occur until Plaintiff delivered to the Company his Series A

Preferred Stock certificate. Plaintiff did not immediately deliver to the Company his Series A

Preferred Stock certificate because he was waiting for confirmation that the remainder of the

series A preferred stock had been converted on the same terms or, if on more favorable terms, for

the opportunity to exercise his rights as to the more favorable terms.

14. In order to further induce Plaintiff to tender his certificate and complete the

conversion, Rector wrote to Plaintiff in a January 29, 2017 email. In the email, Rector again

offered to Plaintiff a “one-time ratchet of $0.25 per equivalent common shares for your position

(currently at 266,666 common shares) that would yield you 800,000 common shares per your

agreement. . . .” Rector also made the following representation to Plaintiff: “If we do not resolve

these issues quickly, it will jeopardize our current funding. Accordingly, the current lead investor

(Mr. Honig) has offered to purchase your Series A stock for $185,000. Alternatively, you can

confirm you wish to continue with the conversion into common stock at the $0.25 conversion

price per the signed agreement. . . .”

15. On or about February 1, 2017, Honig contacted Plaintiff by telephone to urge him

to proceed with the conversion and deliver the stock certificate. Among other things, Honig

disclosed to Plaintiff that he had purchased or expected to purchase all of the other outstanding

4
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 5 of 17 PageID #: 5

unconverted series A preferred stock. Honig again promised to Plaintiff that he would receive the

lowest, most favorable conversion price for his Series A Preferred Stock. Yet Plaintiff continued

to hold his certificate because he was waiting for confirmation from the Company that the other

series A preferred stock had been tendered and converted at the same price offered to Plaintiff

(i.e., $0.25 per share).

16. On information and belief, as of May 22, 2017, there remained issued and

outstanding only 270 shares of series A preferred stock. In a Form 10-Q filed with the Securities

and Exchange Commission (the “SEC”) on May 22, 2017, the Company disclosed the following

regarding the conversion of series A preferred stock:

On February 15, 2017, in connection with the issuance of the Notes


(see Note 6), certain of the holders of the Company’s outstanding
Series A Preferred Stock exchanged 110 shares of Series A
Preferred Stock for 440,000 shares of Common Stock, at an
exchange price of $0.25 per share, pursuant to a preferred stock
exchange agreement, by and among the Company and the holders
of its Series A Preferred Stock (the “Exchange Agreement”). Since
February 2017, one holder owning 200 shares of Series A Preferred
Stock has yet to convert after agreeing that such investor would
convert.

17. On information and belief, the reference in the foregoing 10-Q to “one holder

owning 200 shares of Series A Preferred Stock” referred to Plaintiff and his 200 shares of Series

A Preferred Stock. Following the February 15, 2017 conversion of 110 shares of series A

preferred stock, there remained issued and outstanding and unconverted only another 70 shares

of series A preferred stock other than the 200 owned by Plaintiff.

18. On or about May 25, 2017, Honig again contacted Plaintiff to urge him to proceed

with the conversion proposed by the Company. Honig again promised Plaintiff that he would

receive the lowest conversion price. Honig further disclosed that the other holder of the

5
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 6 of 17 PageID #: 6

remaining 70 shares of series A preferred stock would sell those shares to Honig or convert at a

similar price offered to Plaintiff.

19. On June 6, 2017, the Company filed with the SEC a Form 8-K announcing that on

May 31, 2017, it (and certain affiliates) had entered into an agreement with Eloxx

Pharmaceuticals Ltd., an Israeli company (“Eloxx Ltd.”), pursuant to which, subject to the

satisfaction of certain conditions, a subsidiary acquisition vehicle of the Company would merge

with and into Eloxx Ltd., with Eloxx Ltd. becoming the surviving corporation and a wholly-

owned subsidiary of the Company (the “Merger Transaction”).

20. Among others, the conditions precedent to the Merger Transaction required the

Company to convert all series A preferred stock to common stock. At the time of this

announcement, Plaintiff continued to hold his Series A Preferred Stock certificate, waiting for

notice of more favorable terms or confirmation that his conversion price of $0.25 was the lowest.

21. In or around late June or early July, 2017, Schmidt, the interim CFO of the

Company, told Plaintiff that the other holder of the remaining series A preferred stock had

reached an agreement and that those shares would be converted at the same price as in Plaintiff’s

agreement (i.e., $0.25 per share). Schmidt then asked Plaintiff to deliver his certificate.

22. In reliance on the foregoing representations by the Company, Rector, Schmidt,

and Honig, in or around late June or early July, 2017, Plaintiff delivered to the Company – to his

detriment – the stock certificate representing his 200 shares of Series A Preferred Stock,

believing that he had received the best conversion terms offered to investors of the Company.

Delivery of the stock certificate effectuated the conversion of Plaintiff’s 200 shares of Series A

Preferred Stock into 800,000 shares of common stock.

6
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 7 of 17 PageID #: 7

23. Notwithstanding the representations and covenants of the Company in the

Preferred Stock Exchange Agreement, in or around early November 2017, Schmidt called

Plaintiff to request a proxy statement for a special meeting. Plaintiff inquired as to whether all

the series A preferred stock had been converted. Schmidt advised Plaintiff that Honig had

acquired and converted the remaining 70 shares of series A preferred stock.

24. Upon learning that Honig had acquired series A preferred stock and had converted

those shares into common stock, Plaintiff reviewed the Form 10-K filed by the Company on

October 13, 2017 for the fiscal year ending June 30, 2017 (the “10-K”). Plaintiff was shocked to

read in Note 11 of the 10-K the following information:

On August 24, 2017, the Company exchanged the remaining 70


shares of its outstanding Series A Preferred Stock for 700,000 shares
of Common Stock, at a conversion price of $0.10 per share, pursuant
to a preferred stock exchange agreement that the Company entered
into on August 11, 2017.

25. The conversion transaction described above constituted a consent by Honig to the

conversion of 70 shares of series A preferred stock into 700,000 shares of common stock at a

conversion price of $0.10 per share or less, terms substantially and materially more favorable

than those offered to Plaintiff, and terms to which Plaintiff was entitled pursuant to the most-

favored-nations provision of Plaintiff Preferred Stock Exchange Agreement.

26. On information and belief, the Company, Honig, Rector, and Schmidt acted in

concert, under the direction and control of Honig, to misrepresent to Plaintiff that he would

receive the benefit of any lower conversion price for his Series A Preferred Stock. Honig, Rector,

and Schmidt engaged in a scheme to provide to Honig the most favorable conversion price after

first obtaining from Plaintiff his Series A Preferred Stock certificate for conversion at the higher

price of $0.25.

7
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 8 of 17 PageID #: 8

27. The 10-K also revealed that on or about February 15, 2017 and May 22, 2017, the

Company had amended certain convertible notes (the “November Notes”) to also provide to the

holders thereof a conversion price of $0.10. The company entered into this amendment after

Plaintiff executed the Preferred Stock Exchange Agreement and, therefore, the amendment

constitutes a separate breach by Defendants of their agreements with Plaintiff. On information

and belief, the Company, Honig, Rector, and Schmidt acted in concert, under the direction and

control of Honig, to conceal from Plaintiff the amendment to the November Notes providing for

a materially more beneficial conversion price, at the expense and to the detriment of Plaintiff.

28. Defendants also failed to disclose to Plaintiff that Honig had an undisclosed

relationship with OPKO Health, Inc. (“OPKO”) and its Chief Executive Officer, Dr. Phillip Frost

(“Frost”). On September 7, 2018, the SEC filed a complaint in the Southern District of New

York against Honig, Frost, OPKO, and several others. In its complaint, the SEC alleged that

Honig orchestrated, along with the other defendants, including on certain occasions, OPKO and

Frost, three “pump-and-dump” schemes from 2013 through 2018, in the stock of three public

companies. The complaint alleges that in each scheme, Honig and other defendants acted as an

undisclosed control group to promote the stock of the public companies through misleading

public statements, and then sold their stock for profit.

29. On February 22, 2017, the Company filed a Form 8-K disclosing that on February

15, 2017, the Company had issued convertible promissory notes in the aggregate amount of

$500,000 to OPKO “and an existing stockholder of the Company.” The promissory notes

provided for a conversion price of $0.10.

30. On August 14, 2017, OPKO filed a Form 4, Statement of Changes in Beneficial

Ownership, in which it disclosed that it had converted $400,000 in principal amount owed under

8
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 9 of 17 PageID #: 9

two convertible notes into 4,126,822 common shares of the Company at a conversion price of

$0.10 per share. Defendants failed to disclose this more favorable conversion price to Plaintiff or

offer him an opportunity to convert his Series A Preferred Shares at the same conversion price

offered to OPKO and Frost.

31. On December 19, 2017, the Company consummated the Merger Transaction.

Upon consummation of the Merger Transaction (the “Closing”), the Company adopted the

business plan of Eloxx Ltd. and discontinued the pursuit of the Company’s business plan pre-

Closing. In connection with the Merger Transaction, the Company agreed to acquire all of the

outstanding capital stock of Eloxx Ltd. in exchange for the issuance of an aggregate 20,316,656

shares of the Company’s common stock, par value $0.01 per share, after giving effect to a 1-for-

20 reverse split effected immediately prior to the Merger Transaction. As a result of the Merger

Transaction, Eloxx Ltd. became a wholly-owned subsidiary of the Company. While the

Company was the legal acquiror in the transaction, Eloxx Ltd. was deemed the accounting

acquiror. Immediately after giving effect to the Merger Transaction, on December 19, 2017, the

Company changed its name to Eloxx Pharmaceuticals, Inc.

32. Had Plaintiff been offered the same terms as Honig and the holders of the

November Notes, Plaintiff would have received an additional 1,200,000 shares of common stock

before the 1-for-20 reverse split.

33. Contrary to and in violation of the Preferred Stock Exchange Agreement, the

Company failed to provide Plaintiff the requisite notice that it had entered into a preferred stock

exchange agreement with Honig on August 11, 2017 or that it had amended the November

Notes; nor did the Company issue and deliver to Plaintiff the additional 1,200,000 shares of

9
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 10 of 17 PageID #: 10

common stock he was automatically entitled to as a result of the agreement with Honig or the

amendment of the November Notes.

FIRST CAUSE OF ACTION

Violation of § 10(b) of the Exchange Act and Rule 10b-5

Promulgated Thereunder

(Against All Defendants)

34. Plaintiff re-alleges each of the foregoing paragraphs, as if fully set forth herein.

35. As specifically detailed herein, Defendants: (i) employed devices, schemes, and

artifices to defraud; (ii) made untrue statements of material fact and/or omitted to state material

facts necessary to make the statements not misleading; and (iii) engaged in acts, practices, and a

course of business which operated as a fraud and deceit upon the Plaintiff in connection with the

exchange of his Series A Preferred Stock in an effort to benefit Defendants, individually or

collectively, at the expense of Plaintiff, in violation of §10(b) of the Exchange Act and Rule 10b-

5.

36. Defendants, individually and in concert, directly and indirectly, by the use, means,

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the more favorable

terms offered to Honig in violation of Plaintiff’s rights, as specified herein.

37. As set forth more particularly herein, Defendants had actual knowledge of the

misrepresentations and/or omissions of material facts set forth herein. Defendants’ material

misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and

effect of concealing the truth about the foregoing from Plaintiff. Defendants, if they did not have

actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to

10
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 11 of 17 PageID #: 11

obtain such knowledge by deliberately refraining from taking those steps necessary to discover

whether those statements were false or misleading.

38. As a result of the dissemination of the materially false and/or misleading

information and/or failure to disclose material facts, as set forth above, Defendants awarded to

Honig a materially lower conversion price, resulting in the delivery to Honig of a substantially

greater number of shares per share of series A preferred stock exchanged in connection with the

transactions set forth above, the results of which caused damage to Plaintiff.

39. At the time of said misrepresentations and/or omissions, Plaintiff was ignorant of

their falsity and reasonably believed them to be true.

40. Plaintiff relied on Defendants to disclose all material facts truthfully.

41. Had Plaintiff known the truth regarding the foregoing, which was not disclosed by

Defendants, Plaintiff would not have exchanged any of his Series A Preferred Stock, or, if he had

exchanged such stock, he would not have done so at the artificially inflated conversion price

offered to him.

42. By virtue of the foregoing, Defendants have violated §10(b) of the Exchange Act

and Rule 10b-5 promulgated thereunder.

43. As a direct and proximate result of Defendants’ wrongful conduct, Defendants

violated § 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder in connection with

the exchange of his Series A Preferred Stock.

11
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 12 of 17 PageID #: 12

SECOND CAUSE OF ACTION

Violation of § 20 of the Exchange Act

(Against All Defendants)

44. Plaintiff re-alleges each of the foregoing paragraphs, as if fully set forth herein.

45. By virtue of their high level positions, participation in and/or awareness of the

Company’s operations, and/or intimate knowledge of the false statements disseminated to

Plaintiff, Rector, Schmidt, and Honig (the “Control Group”) had the power to influence and

control, and did influence and control, directly or indirectly, the decision making of the

Company, including the dissemination to Plaintiff of various statements which Plaintiff contends

were false and misleading, the offering to Honig of the more favorable conversion terms, and the

concealment of same from Plaintiff. The Control Group were provided with or had unlimited

access to information concerning the ownership and conversion status of series A preferred stock

and other information before Plaintiff and other members of the investing public and had the

ability to prevent the issuance of the statements or cause the statements to be corrected.

46. In particular, members of the Control Group, including Rector and Schmidt, had

direct and supervisory involvement in the efforts of the Company to convert all of the series A

preferred stock to common stock and, therefore, are presumed to have had the power to control

or influence the particular transactions giving rise to the securities violations as alleged herein,

and exercised the same.

47. As set forth above, Rector, Honig, and Schmidt violated §10(b) and Rule 10b-5

by their acts and/or omissions as alleged in this Complaint. By virtue of their positions as

controlling persons, the members of the Control Group are liable pursuant to §20(a) of the

Exchange Act.

12
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 13 of 17 PageID #: 13

48. As a direct and proximate result of the individual Defendants’ wrongful conduct,

Plaintiff suffered damages in connection with his conversion of the Company’s preferred stock.

THIRD CAUSE OF ACTION

Fraud

(Against All Defendants)

49. Plaintiff re-alleges each of the foregoing paragraphs, as if fully set forth herein.

50. Defendants intentionally misrepresented to Plaintiff that they intended to extend

to him the most favorable terms for the conversion of Plaintiff’s Series A Preferred Stock. In

addition, Defendants intentionally concealed their scheme to defraud Plaintiff out of an

additional quantity of shares of common stock for the benefit of Honig.

51. Specifically, Defendants:

(a) Misrepresented to Plaintiff that he would receive the benefit of any

more favorable terms for the conversion of series A preferred stock

agreed to by the Company after the conversion of Plaintiff’s Series

A Preferred Stock;

(b) Concealed from Plaintiff the fact that Honig had purchased the

remaining shares of series A preferred stock;

(c) Concealed from Plaintiff the fact that the Company had agreed to

convert Honig’s shares of series A preferred stock at substantially

and materially more favorable terms; and

(d) Intentionally failed to give notice to Plaintiff of the foregoing

contrary to the terms of the Preferred Stock Exchange Agreement.

52. Defendants made these intentional false representations, and engaged in acts of

concealment, for the purpose of furthering Defendants’ fraudulent schemes.

13
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 14 of 17 PageID #: 14

53. In reasonable and justifiable reliance on Defendants’ representations and

concealment, Plaintiff entrusted Defendants by delivering to the Company his Series A Preferred

Stock certificate for conversion.

54. As a direct and proximate result of Defendants’ fraudulent misrepresentations and

concealment, Plaintiff has suffered injury and damages, in an amount to conform to proof at trial.

55. Defendants’ intentional misrepresentations, omissions and concealments, as

described herein, were willful, malicious and designed to obstruct and otherwise interfere with

the rights granted to Plaintiff in the Preferred Stock Exchange Agreement. Plaintiff, therefore, is

entitled to recover exemplary and punitive damages in a sum sufficient to punish Defendants.

FOURTH CAUSE OF ACTION

Breach of Contract

(Against the Company)

56. Plaintiff re-alleges each of the foregoing paragraphs, as if fully set forth herein.

57. On or about January 18, 2017, Plaintiff and the Company entered into a written

Preferred Stock Exchange Agreement whereby the Company promised to convert Plaintiff’s

Series A Preferred Stock at a conversion price of $0.25 per share, or any more favorable

conversion price extended to any other party.

58. The Preferred Stock Exchange Agreement is a valid and enforceable contract.

59. Plaintiff substantially performed by delivering to the Company a certificate for his

200 shares of Series A Preferred Stock.

60. The Company breached the terms of the Preferred Stock Exchange Agreement by

failing to provide notice to Plaintiff of the conversion of other shares of series A preferred stock

at a more favorable conversion price of $0.10 per share.

14
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 15 of 17 PageID #: 15

61. The Company breached the terms of the Preferred Stock Exchange Agreement by

failing to issue and deliver to Plaintiff 1,200,000 additional shares of its common stock based on

the more favorable conversion price of $0.10 per share presented to Honig and OPKO.

62. As a direct and proximate result of the Company’s breach of Preferred Stock

Exchange Agreement, Plaintiff has suffered injury and damages, in an amount to conform to

proof at trial.

FIFTH CAUSE OF ACTION

Breach of Implied Contract of Good Faith and Fair Dealing

(Against the Company)

63. Plaintiff re-alleges each of the foregoing paragraphs, as if fully set forth herein.

64. On or about January 18, 2017, Plaintiff and the Company entered into a written

Preferred Stock Exchange Agreement whereby the Company promised to convert Plaintiff’s

Series A Preferred Stock at a conversion price of $0.25 per share, or any more favorable

conversion price terms extended to any other party.

65. Plaintiff fully performed under the Preferred Stock Exchange Agreement.

66. On the other hand, the Company violated its duties to act fairly and in good faith,

engaging in a sophisticated, calculated, and fraudulent scheme to obtain the conversion of

Plaintiff’s Series A Preferred Stock on terms less favorable than those extended to Honig and

OPKO. In furtherance of this scheme, the Company fraudulently misrepresented and concealed

from Plaintiff the truth for the illegal personal gain of Honig and OPKO.

67. As a direct and proximate result of the Company’s breach of the implied covenant

of good faith and fair dealing, Plaintiff was harmed and has suffered injury and damages, in an

amount to conform to proof at trial.

15
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 16 of 17 PageID #: 16

68. The Company’s wrongful conduct, as described herein, was willful, malicious and

designed to obstruct and otherwise interfere with the Plaintiff’s right of conversion of Series A

Preferred Stock on the most favorable terms as required under the Preferred Stock Exchange

Agreement. Plaintiff, therefore, is entitled to recover exemplary and punitive damages in a sum

sufficient to punish the Company.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment against Defendants and for such

other relief as follows:

(a) For an order directing Eloxx to issue to Plaintiff 60,000 shares of common stock, which
amount reflects the 20:1 reverse stock split of the Plaintiff’s pre-split common stock;

(b) For compensatory, special, and consequential damages according to proof at trial;

(c) For statutory damages in an amount of at least three times the amount of actual damages
suffered by Plaintiff;

(d) For prejudgment interest at the maximum legal rate;

(e) For an award of exemplary or punitive damages in an amount appropriate to punish


Defendants;

(f) For temporary, preliminary, and permanent injunctive relief;

(g) For disgorgement of Defendants’ ill-gotten gains resulting from the conduct alleged
herein;

(h) For an accounting of all monies, property, and all other benefits obtained by Defendants
resulting from the conduct alleged herein;

(i) For imposition of a constructive trust over Defendants’ ill-gotten gains derived from the
conduct alleged herein;

(j) An award of attorney's fees, costs, and expenses in an amount to be determined at trial,
plus interest; and

16
Case 1:19-cv-00447-RGA Document 1 Filed 03/04/19 Page 17 of 17 PageID #: 17

(k) Such other and further relief as this Court deems just and proper.

Dated: March 4, 2019 CKR LAW LLP

By: /s/ Gilbert R. Saydah, Jr.


Gilbert R. Saydah, Jr.
(Delaware Bar No. 4304)
1000 N. West Street
Suite 1200
Wilmington, DE 19801
Tel. (302) 295-4971
gsaydah@ckrlaw.com

and

Michael James Maloney


Pro hac vice admission expected
1330 Avenue of the Americas
14th Floor
New York, New York 10019
Tel. (212) 259-7300
mmaloney@ckrlaw.com

Attorneys for Plaintiff John Winfield

17