Item 3. Legal Proceedings
ITEM
3.
LEGAL
PROCEEDINGS
The
Company and its subsidiaries are involved in the following legal proceedings:
Asher
Alkoby, et al. v. FDCTech
This
action is pending in the London Circuit Commercial Court under Claim Number LM-2024-000330 as of December 9, 2024. The claimants are
Asher Alkoby and other former shareholders of Alchemy Markets Ltd. (“AML”), a Malta-incorporated broker that FDCTech purchased
in June 2023. Following completion of the acquisition, the Company discovered that in 2019, the target company had anti-money laundering
deficiencies and was fined by the Financial Intelligence Analysis Unit.
An
external audit also revealed that the previous shareholders had taken loans from the company that were never repaid, resulting in the
net capital of the company being lower than disclosed during negotiations. Based on these findings, FDCTech withheld the final payment
to the sellers.
The
claimants are seeking approximately $1.02 million in amounts they allege are owing under the Share Sale Agreement, which they are seeking
to rectify to make it legally enforceable. The Company has counterclaimed for a declaration that the Share Sale Agreement is ineffective
and unenforceable and seeks repayment of $915,000 paid to the sellers. On October 17, 2025, the Court granted the claimants permission
to amend their claim to include a third claimant. The Company has prepared an Amended Defense and Counterclaim through Counsel, which
was served May 9, 2025. A Costs and Case Management Conference took place on November 17, 2025, at which directions will be given to
the trial, which will take place in November 2026.
FDCTech,
Inc. v. Intelligenceline.com, Fintelegram.com, et al.
This
action is pending in the Superior Court of California, County of Orange. FDCTech alleges that the defendants, through their websites
Intelligenceline.com, Fintelegram.com, and Criticalintel.com, published false and defamatory statements accusing the Company of fraud,
illegal conduct, and regulatory violations. The Company claims these statements have caused significant reputational and financial harm,
including lost business opportunities. FDCTech further alleges that the defendants engaged in an extortion scheme by demanding payment
for the removal of defamatory content.
The
complaint asserts claims for defamation per se, defamation per quod, trade libel, and false light, seeking damages and injunctive relief.
The complaint was filed in 2025 but had not yet been served as of December 31, 2025. A hearing took place on December 15, 2025, at the
Company’s motion. Following the hearing, the court instructed FDCTech to conduct an investigation as to the beneficial owner of
Intelligenceline.com.
Alchemy
Markets Ltd. v. Il-Korp għall-Analizi ta’ Informazzjoni Finanzjarja (Ref: 104/2023)
This
appeal is pending before the Court of Appeal (Inferior Jurisdiction) in Malta. On September 23, 2023, the Financial Intelligence Analysis
Unit (FIAU) imposed an administrative penalty of €419,997 and a follow-up directive on Alchemy Markets Ltd. (formerly NSFX Limited),
a subsidiary of the Company, based on a compliance examination conducted between November 25, 2019, and December 5, 2019. The examination
occurred approximately four years prior to the decision and under a different ownership and control of the subsidiary.
The
Company filed this appeal on October 19, 2023, challenging the decision-making process that led to the imposition of the penalty as well
as the law on which it was based, asserting that the penalty is arbitrary and excessive, and claiming that certain aspects of the decision
are unfounded both by law and in fact. The Company seeks to overturn the administrative penalty and the follow-up directive imposed by
FIAU. The case is in the evidentiary production stage pertaining to the Company as appellant. On October 24, 2025, a hearing was held
for the Company to continue presenting evidence. The Court scheduled an additional hearing for the FIAU to cross-examine the Company’s
witnesses for February 2, 2026, to be heard before Madam Justice Rachel Montebello, following which the matter will be adjourned for
final legal submissions.
Alchemy
Markets Ltd. v. L-Avukat tal-Istat u Il-Korp għall-Analizi ta’ Informazzjoni Finanzjarja (Ref: 159/2024)
This
constitutional challenge is pending before the First Hall Civil Court (Constitutional Jurisdiction) in Malta and relates to the same
September 23, 2023, FIAU decision described above. The Company filed this application on April 2, 2024, challenging: (i) the composition
of the FIAU and its enabling law; (ii) the decision-making processes which allegedly breach the Company’s fundamental human right
to a fair hearing; and (iii) that given the penal nature of the penalty, in breach of the Constitution of Malta, the Company was not
adjudged by an independent court. The Company requests the Constitutional Court to set aside the FIAU decision in its entirety.
A
first procedural hearing took place on May 7, 2024, and the Company has brought its evidence in support of the claim. The First Hall
Civil Court (Constitutional Jurisdiction) has, in various instances, pronounced that administrative penalties being imposed by the FIAU
are more akin to a penal sanction and that, therefore, subject persons should be afforded the full rights afforded to an accused under
criminal law and has consistently quashed FIAU decisions on this basis. While these judgments are, in most part, subject to further appeal
before the Constitutional Court of Appeal and have, in two instances, been overturned by the Constitutional Court of Appeal, the Company
considers that the principles underpinning such previous judgments are applicable to the Company. The case remains pending as of January
21, 2026; the next hearing in the matter is set for January 28, 2026.
The
Company believes it has meritorious defenses and counterclaims in the above matters and intends to defend them vigorously. However, litigation
is inherently uncertain, and the Company cannot predict the outcome of these proceedings with certainty.
There
are no additional material pending legal or governmental proceedings other than ordinary routine litigation incidental to the business.
The Company or any of its subsidiaries is a party, or their property is the subject.
ITEM
4.
MINE
SAFETY DISCLOSURES.
Not
applicable.
18
PART
II