Martingale  Risk is forming a collective lawsuit against Bio-On S.p.A., a bio-plastic company and former unicorn, based in Bologna, Italy. Bio-On S.p.A. was rather successful in creating a false narrative concerning its company and financial status. Nonetheless, their narrative was short-lived following the bankruptcy issued by the Court of Bologna on  Dec 20th, 2019 (sentence no. 137/19). Accompanied by numerous  misstatements dating between 2016 and 2019, crucial facts were unveiled  in relation to their conspicuous accounting irregularities, grotesquely  inflated expenses, and dubitable transactions.

Founded  in 2007, Bio-On S.p.A. concluded an IPO on October 24th, 2014, listing  13,237,500 ordinary shares on the AIM Italian market at an initial price  of EUR 5 per share. The core of Bio-On's business model was the  industrial production of a biopolymer (Minerv PHAs) that is 100%  biodegradable in soil, freshwater, and seawater. Claiming to be the  first company in the world engaged in the production of such  bio-plastics, they made declarations involving a variety of ambitious  projects utilizing its bio-plastics in a variety of different sectors  from medical, industrial, furniture production, and skincare.  Additionally, Bio-On has over time issued several press releases  referring to significant partnerships and prospects for a substantial  expansion of its business.

Nevertheless,  with regards to their partnership announcements, it has been observed  that an estimate of over two hundred million worth of collaborative  projects have been proclaimed but not developed further, suggesting a  hollow business model on the company’s part.

To  state further, Bio-On had claimed to be the owner of over 200 patents  and patent applications, while in the patent registry of the Italian  Ministry of Economic Development, only 2 patents were identified to be filed by this company.

Bio-On's  share price grew at a more than sustained pace, rising by around 150%  during 2015 and over 350% between the period of 2014 to 2018. In July  2018, the share price reached an all-time high of approx. EUR 70 per  share, amounting to a rise of 1,300% from the initial share price of EUR  5 in October of 2014 and officially exceeding EUR 1 billion in  capitalization.

This  growth was attributed to the publication of press releases and  financial statements that were later confirmed to be fabricated and  capable of causing a significant alteration in the price of financial  instruments issued by Bio-On (in violation of Article 185 of Legislative  Decree 58/1998, 'Market Manipulation'). On October 23rd, 2019, the  Guardia di Finanza, at the instigation of the Public Prosecutor's Office  of Bologna, seized assets worth more than EUR 150 million, notified  precautionary measures for three managers, and subjected six other  Bio-On members to preliminary investigations on charges of false  accounting and market manipulation (Article 185 of Legislative Decree  58/1998). The following day, Borsa Italiana S.p.A. indefinitely  suspended the trading of the Company's shares.

Case Merits

On December 20th, 2019, the Court of Bologna declared Bio-On S.p.A. bankrupt by judgment No 137/19.

Following  the conclusion of the preliminary investigation (No. 11826/2019  R.G.R.N.), deriving from the results of the investigation activities  carried out by the Guardia di Finanza and Consob on April 29th, 2021,  the Prosecutor's Office of Bologna requested the committal for trial  (Articles 416, 417 of the Italian Criminal Code) of eight former members  of Bio-On’s top management as well as of Company’s two external  auditors Ernst and Young S.p.A. (“E&Y”) and PricewaterhouseCoopers  S.p.A. (“PwC”).

According to Prosecutor's Office:

“By  means of several executive actions of the same criminal plan,  disseminated or in any event contributed to the preparation, also by  means of omissive and compliant conduct, in breach of the supervisory  and auditing duties false information on the economic and financial  conditions of the company [... ], as a result of which there was an  undue increase in the value of BIO-ON S.p.A. shares, from the placement  price of 5.00 per share to values between 68.5 euros (as of November  2018) and 56.5 euros (as of July 2019)".

At  the preliminary hearing of December 6th,2021, the Bologna Public  Prosecutor's Office filed a request for committal for trial for the  crime of so-called improper fraudulent bankruptcy (Article 329 of  Legislative Decree 14/2019) and abusive use of credit (Article 218 of  the Bankruptcy Law). To conclude, at the hearing of February 28th,2022,  the Judge for Preliminary Hearings, Dr. Maria Cristina Sarli, accepted  the request to summon Ernst & Young S.p.A. and  PricewaterhouseCoopers S.p.A. as civilly liable in their capacity as  Bio-On's auditing firms, in addition to admitting as civil plaintiffs  approximately 900 individuals and legal entities.

Our Proposal

In  light of the ongoing penal persecution against the former top  management of Bio-On, EY, and PWC, we propose to file a collective  lawsuit on the investors’ behalf against Bio-On S.p.A’s auditors which  will be held at the Court of Rome and Court of Milan. The lawsuit is  directed at obtaining repayment of the damages incurred from investment  losses in Bio-On S.p.A equities.

Our  firm is providing its services solely on a success fee basis. We will  pay all administrative and tax expenses incurred in the litigation, such  as notification and registration expenses for documents filed to the  Court and any attorney fees or administrative expenses related to the  experts eventually engaged by the Court. We will fully indemnify our  clients from any adverse costs or any possible fees generated from the  lawsuit.

Terms and Conditions

1.  Compensation: Martingale Risk will collect a Success Fee plus VAT  calculated on the Losses Recovered from Bio-On, as resulting from: (a) the  conclusion of a settlement agreement with Bio-On in the Negotiation or  Litigation phase; (b) the issuance of a definitive successful court  trial.

2.  Expenses: Martingale Risk will pay all administrative and tax expenses  incurred in the Litigation, such as: notification and registration  expenses for documents filed to the Court and any administrative  expenses and fees related to the experts eventually engaged by the  Court. Martingale Risk will be liable to pay the legal adverse costs in  case of an unsuccessful lawsuit.

3.  Representation: The Client will sign a mandate providing Martingale  Risk with Power of Attorney which includes the power to take every  decision concerning the lawsuit, including the power to settle, to  collect, and dispersed the recovered amount from Bio-On until the issuance  of a definitive decision. The Client will also sign a Power of Attorney  to the lawyer (s) directly involved in the litigation.

DISCLAIMER:  THESE TERMS ARE INDICATIVE AND NON-BINDING AND CAN BE SUBJECT TO  CHANGES PRIOR TO THE SIGNING OF THE MANDATE, GIVEN THE RESULTS OF THE  PRELIMINARY ANALYSIS AND PRELIMINARY LEGAL OPINION. MARTINGALE RISK WILL  RESERVE ALL THE RIGHTS TO DECLINE THE DEFENSE OF EACH CLIENT THAT IS  DEEMED UNSUITABLE TO THE LAWSUIT. ALL DISPUTES RELATED TO THE  INTERPRETATION OF THE MANDATE WILL BE REGULATED BY THE INTERNATIONAL  CHAMBER OF COMMERCE (ICC).