Tezos, The $232 Million ICO, Sued in Class Action Lawsuit for Securities Fraudbr>
The founders and backers of Tezos, a company that staged one of the largest initial coin offerings ever, are being sued in California Superior Court in a class action.
The company’s forward movement following its $232 million ICO earlier this year has stalled, as the relationship between the company founders — Kathleen and Arthur Breitman — and Johann Gevers, the head of the Tezos Foundation, the organization that managed the ICO planning, have apparently soured.
The lawsuit [PDF] was filed in the San Francisco County branch of the California Superior Court. It accused both sides of the Tezos team with committing securities fraud. Named are Dynamic Ledger Solutions, Johann Gevers and the Tezos Foundation, as well as Strange Brew Strategies, the PR firm that promoted the ICO.
The unusual step of naming the PR firm claims that Strange Brew made misleading statements on Tezos’s progress before the ICO, including boosting Ernst & Young, Deloitte and LexiFI as using Tezos’s software, something the firms deny.
The plaintiff is Andrew Baker, who contributed one bitcoin to the Tezos ICO, represented by the firm of Taylor-Copeland.
Reuters issued a special report earlier this month indicating Tezos may be falling apart.
A battle for control of the company is underway, Reuters claimed. The struggle pits Tezos founders Arthur and Kathleen Beitman against Johann Gevers, the president of the Swiss foundation that helped with the ICO setup and has promoted the company. Tezos also has private investors, most prominently noted backer Tim Draper.
The foundation holds all of the funds raised through the ICO, which now are valued at more than $400 million, thanks to the rise in price of bitcoin and ether, the two currencies accepted in the offering. But Reuters said the Breitmans are attempting to oust the foundation head, using their control of the Tezos source code as leverage.
Tezos is a blockchain company, but has far grander plans than facilitating business for others. Among its plans:
- “Sponsor a leading computer science department with endowed professorships and extensive grants to graduate students in the field of formal verification”
- “Acquire mainstream print and TV media outlets to promote and defend the use of cryptographic ledger in society”
- “Negotiate with a small nation-state the recognition of Tezos as one of their official state currencies, which would immediately give Tezos favorable treatment in terms of financial regulation. Attempt negotiations to purchase or lease sovereign land”
Reuters reported that an attorney for the Breitmans sent two foundation board members a letter asking for Gevers removal, limit the foundation’s future responsibilities, and granted the Breitmans a new structure that would give them control of Tezos. Gevers was accused of “self-dealing, self-promotion and conflicts of interest.”
Gevers told Reuters at the time that he is not stepping down and claimed the Breitmans were staging “an illegal coup.”