Kathleen Breitman
Alt coins,  Cryptocurrencies,  People,  Technology

Tezos to settle $232 million ICO lawsuit

Plaintiffs have been seeking up to $25 million in damages amid allegations that the Tezos initial coin offering was an unregistered securities sale

The Tezos Foundation announced on March 20 that it has entered into a settlement concerning a consolidated class action lawsuit worth $25 million.

The long-running legal fight relates to the $232 million initial coin offering that was held in summer 2017. The lawsuit alleged it was an unregistered securities sale.

At the time, the sum raised represented a record-breaking amount. But reports from the likes of Reuters suggested that a battle for control of the funds was taking place behind the scenes.

That dispute pitted Tezos blockchain founders Kathleen and Arthur Breitman against Johann Gevers, then president of the supposedly neutral Tezos Foundation, which was set up to handle the ICO.

The feud and subsequent lawsuit badly delayed and nearly killed the self-amending smart contract platform. Kathleen Breitman (No. 32 on the Modern Consensus 100 Most Influential People in Blockchain 2020) and her husband were vilified after the Reuters article. She raised eyebrows after she took a profanely dim view of Reuters’ reporting.

Plaintiffs in the lawsuit claimed that they were entitled to compensation because they had served as investors during the ICO, but Tezos had failed to register the sale with the U.S. Securities and Exchange Commission. Several other crypto companies—notably Kik and Telegram—have landed in hot water with the regulator on these grounds.    

The settlement

In an update, the Tezos Foundation said that the settlement is yet to be approved by the courts—adding that it has decided to take this approach because “it is in the best interest of the Tezos project and community as a whole.”

The blog post added: “The Foundation continues to believe the lawsuits were meritless and continues to deny any wrongdoing. However, lawsuits are expensive and time-consuming, and it was decided that the one-time financial cost of a settlement was preferable to the distractions and legal costs associated with continuing to fight in the courts.”

It’s unclear how much the settlement is worth to those involved in the class action lawsuit, but we do know that they were seeking damages of about $25 million.

Plenty of assets

Tezos released the latest of its twice-yearly updates earlier this month—revealing that the foundation is currently sitting on assets worth $635 million. That’s some way off the $232 million that was raised three years ago. Even a settlement of $25 million would seem to cause the blockchain platform little financial harm, as this is barely 5% of the funds in its coffers.

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Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption. He owns cryptocurrencies.