Tezos, a company with over half a billion dollars in crypto assets, have been rocked by yet another lawsuit. Following a record-breaking ICO four months ago, founders Arthur and Kathleen Breitman have endured a torrid time after falling out with the head of the Tezos Foundation. Concerned investors filed a class action lawsuit on October 25. Now, it’s emerged that a second suit has been filed in Florida.
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When ICOs Go Wrong
When husband and wife team Arthur and Kathleen Breitman raised $232 million in a high profile token sale this year, they were hailed as paragons of success. Their decentralized governance model was going to be the benchmark against which future tokenized projects would be measured. Following a well-publicized fallout with Tezos Foundation overseer Johann Gevers, however, the project became embroiled in controversy.
Investors, who were promised a stake in “a new digital commonwealth”, are still waiting for their decentralized wonderland to materialize. Frustrated and fed up, a group of them have lost patience and filed a class action lawsuit, the second to be leveled against the Breitmans in three weeks. The Tezos lawsuit, which was filed in a U.S. District Court in Florida, alleges that the couple sold unregistered securities in violation of federal law.
Court In The Act
With SEC chairman Jay Clayton recently opining that the majority of ICOs constitute securities, Tezos’ plaintiffs may have a prima facie case. In a wide-ranging complaint, the Breitmans, the Tezos Foundation, and Dynamic Ledge Solutions, the company which owns Tezos’ intellectual property, are all cited as defendants.
The damning complaint reads:
Notwithstanding the defendants’ attempts to avoid governmental and private scrutiny, it is clear that the financiers were indeed profit-seeking investors in a security and that Defendants promoted and conducted an unregistered offering of securities, not a charitable fundraiser.
It also cites “many misrepresentations, factual omissions and unlawful activities engaged in by the defendants – it appears [the plaintiffs] cannot, and potentially will not, see any return on their investments”.
They Were Promised Tezzies But Wound Up With a Tote Bag
In a quote that has come back to haunt Kathleen Breitman, the project founder likened the company’s fundraiser to contributing to a public television station. Dismissing suggestions that “Tezzies” tokens could be securities, she said it was more like receiving “a tote bag”. With the Tezos project yet to get off the ground, and investors forced to watch in anguish as the cryptocurrencies they parted with appreciate in value, the event has cast a shadow over 2017’s ICO bonanza.
The $232 million of ethereum and bitcoin that Tezos raised back in July would be worth $590 million at today’s prices. There should be more than enough in the pot to cover legal fees and compensation, should the courts find against Tezos in either of their impending lawsuits. Whatever the outcome, the experience has left a bitter taste in the mouths of investors.
Do you think investors are right to file a class action lawsuit? Let us know in the comments section below.
Images courtesy of Shutterstock, and Tezos.
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Source: News Bitcoin