Tezos founders are at the receiving end of a class-action lawsuit as a disgruntled initial coin offering (ICO) participant has dragged the project as well as the Tezos foundation to court.
The plaintiff in the case is Andrew Baker has filed the lawsuit through legal firm Taylor-Copeland accusing the founders as well as the foundation of securities fraud. The suit names as defendants the Breitmans and their company – Dynamic Ledger Solutions – as well as Johann Gevers and the Tezos Foundation, public relations firm Strange Brew Strategies, which promoted Tezos ahead of its ICO.
The lawsuit has been filed after an explosive investigative report revealed how Tezos founders Kathleen and Arthur Breitman and Johann Gevers, the head of the Tezos foundation were fighting among themselves. The suit accuses Strang Brew Strategies for making misleading statements about development status of Tezos, including making claims to the media world that companies such as Ernst & Young, Deloitte, and LexiFi had adopted Tezos in their development labs. These firms have released statements saying that they have considered the project's technology as a potential blockchain solution, but they have not implemented it.
The Breitmans accuse Gevers of self-dealing, while Gevers accuses the Breitmans of attempting to exert undue control over the operations of the foundation. Against this backdrop, development of the Tezos blockchain has lagged behind stated targets, and the price of Tezos futures has dropped considerably on cryptocurrency exchanges. Now, one crowdsale participant is accusing both sides of committing securities fraud.
Further, the suit accuses the founders of misleading potential token buyers about the time it would take to complete the development of and launch the blockchain. It further claims that these statements are not covered by the “safe harbor” provision for forward-looking statements since they were not specifically identified as such when made.
The suit also claims that, despite Tezos’ assertions to the contrary, ICO contributions were investments – not donations. Consequently, the suit alleges that the ICO constitutes a securities offering under U.S. federal law and that the crowdsale violated securities regulations.
Brian Klein, attorney for the Breitmans, claims the lawsuit "is without merit" and that they intend to "aggressively defend themselves."