There is no end in sight for blockchain startup Tezos’ legal woes.
A new complaint was filed in the United States last week, asking Californian courts to issue a temporary restraining order on US$1 billion worth of investor assets that Tezos raised during its token sale.
In July, Tezos initiated an initial coin offering (ICO) in which it netted $232 million for a project that promised to deliver an improved version of the Bitcoin blockchain with flexible governance rules. Before the ICO, the team said the Tezos network would be active in November, with a secondary trading happening around the same time.
Neither the promised network nor the coins exist to this day. And investors are claiming that the people behind Tezos have been liquidating the BTC and ethereum—worth an estimated $1.2 billion in today’s trading prices—sitting in a Swiss-based foundation.
Last Dec. 13, law firm Block & Leviton filed a complaint seeking to freeze all the assets of Tezos founders Arthur and Kathleen Breitman, Dynamic Ledger Solutions, Inc., the Tezos Foundation, Johann Gevers, Diefo Ponz and Guido Schmitz-Krummacher “that were collected via or derived from the Tezos ICO,” as well as to stop the defendants from selling, transferring, converting or disposing the ICO proceeds.
Also named in the lawsuit were Swiss crypto financial services firm Bitcoin Suisse, which was recently revealed to have the power to block Tezos Foundation transactions, and its founder, Niklas Nikolajsen.
“The situation regarding the ICO proceeds has deteriorated further, making irreparable looting an imminent prospect,” according to the complaint. “Without immediate judicial intervention, defendants may completely consume the illegally obtained ICO proceeds, leaving plaintiff and the class with no remedy.”
The filing also accused the organizers of the Tezos token sale of violating U.S. securities laws, claiming that the token sale represented an “unqualified and unregistered” sale of “securities.” This is the fourth class-action suit filed against Tezos; the previous complaints accused the project of violating security laws and committing investor fraud.
Then there were two
Around the same time that Block & Leviton is filing their class-action suit in the United States, another trouble is reportedly brewing in Switzerland.
Reuters reported that Schmitz-Krummacher resigned from his post as one of the board members of the Swiss-based Tezos Foundation last week. The Swiss legal and management expert was one of the defendants named in the latest complaint against Tezos.
Tezos is danger of falling apart as its founders battle for the control of the project. The Breitmans were reportedly out to oust Johann Gevers, and Schmitz-Krummacher was “frustrated by the infighting, which was consuming a lot of his time,” according to the news outlet.