03
Nov
2017

Tezos Founders Sued for Securities Fraud in Potential Class Action

CoinDesk

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A lawsuit seeking class action status has been filed in California against the founders and promoters of the controversial Tezos blockchain project.

The lawsuit represents the latest twist in the ongoing spat between Tezos founders Kathleen and Arthur Breitman and Johann Gevers, the head of the Tezos Foundation, a non-profit created to promote and support development of the project. The Breitmans accused Gevers of self-dealing, with Gevers alleging in turn that the Breitmans were seeking to assassinate his character and attempting to usurp control of the foundation.

That internal power struggle broke into public view earlier this month, stoking criticism of the project and raising questions about when the Tezos network would go live. It came months after the project raised a record $232 million in a token sale – the proceeds of which are now part of the dispute. The tokens have yet to be issued.

'Mess' ahead?

How the lawsuit shakes out – including whether it receives a class-action certification – remains to be seen, given the early stages of the case.

Even still, observers like Anderson Kill lawyer Stephen Palley say that the lawsuit could drag on regardless of the long-term fortunes of the Tezos network itself. The allegation that state securities laws (not just federal ones) were violated represents "a significant area of risk for ICO promoters" in general, Palley said.

Palley also suggested that the lawsuit may not be the only one filed in relation to the controversy, speculating that "copycat" litigation could emerge as time goes on.

"In short, it's a complicated mess. I doubt that it will be resolved quickly, even if tokens are issued quickly. It is unclear what impact that this will have on Tezos' development," Palley told CoinDesk, adding: "It's definitely not a great development for a new venture.

To read the full article:  Tezos Founders Sued for Securities Fraud in Potential Class Action

Related People

- Of Counsel | Anderson Kill P.C.
Of Counsel
Washington, DC

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