The Tezos ICO, which raked in a whopping $400 million, has been the subject of much controversy in recent weeks. Following a highly publicized spat between the individuals at the core of the Tezos project, not one, not two, but three separate class-action lawsuits are seeking the return of the ETH and BTC contributed to the ICO.
The latest lawsuit, which is being brought by the Restis Law Firm, P.C. and Lite DePalma Greenberg, LLC, echoes the arguments of the two that preceded it: the Tezos tokens, which were marketed to ICO participants as securities, were never legally registered as such.
The suit seeks to “recover bitcoin and ethereum contributed to the Tezos ICO, along with any corresponding appreciation in value of those invested assets, or the equivalent in monetary damages or restitution” for its plaintiffs.
The initial lawsuit was filed on October 25, just a few days after Tezos caught a wave of negative attention for a public dispute between its founding members and the Tezos Foundation head. The suit was brought by the Taylor-Copeland Law firm, and accused Gevers, the Breitmans, and Dynamic Ledger Solutions, Inc., of “selling unregistered securities, committing securities fraud, false advertising and unfair competition,” according to a report from CoinDesk.
David Silver, a partner at the Florida-based SilverMiller firm, filed the second suit in mid-November. The language in the second suit was a bit more direct in its accusation of the Breitmans and the Tezos Foundation of outright deception:
“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.”
The reference to a charitable fundraiser is related to the language of the Tezos ICO, which described contributions as “non-refundable donations”.
The Trouble with Tezos: an Incompetent Partner, or an Illegal Coup?
The Tezos drama has a few main characters. First, there are Kathleen and Arthur Breitman, owners of Dynamic Ledger Solutions, Inc., and founders of the Tezos blockchain project. In the opposing corner is Johann Gevers, who founded the Switzerland-based non-profit, the Tezos Foundation.
The story goes something like this: after starting the Tezos project, Kathleen and Arthur wanted to shift the ownership of Tezos’ intellectual property to the Tezos Foundation, a move that allegedly would have allowed them to take a $20 million pay-out “without getting their hands dirty in Switzerland”, according to a report from Finews.
The real trouble began when the network’s founding couple, Kathleen and Arthur Breitman, accused the head of the Tezos Foundation, Johann Gevers, of deceptively arranging a $1.5 million bonus for himself. Additionally, the Breitmans did not have many kind things to say about Gevers as the leader of the foundation; in an emailed statement to Fortune, Kathleen Breitman said that Johann was an incompetent “roadblock” who failed to fulfill the basic duties required of his position.
The accusations were formally laid out in a 9-page letter saying that Gevers was guilty of “self-dealing, self-promotion and conflicts of interest.” In an interview with Reuters, Gevers fired back at the Breitmans, accusing them of organizing an illegal coup to oust him from the foundation. “This is attempted character assassination,” said Gevers “It’s a laundry list of misleading statements and outright lies.”
The drama surrounding the accusations sent the price of Tezos token futures spiraling. The tokens, which have been affectionately named ‘Tezzies’, dropped roughly 60% in the wake of the drama. Kathleen Breitman told Fortune that the company’s plans to release the Tezzies to ICO participants in February remained unchanged.
On October 25, the same day that the first class-action suit was filed, the Breitmans took the stage at the Money2020 conference in Las Vegas. “This will blow over once the board meets in a few days,” said Kathleen. She was mistaken.