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Lawsuit Against $232 Million Tezos Being Prepared, Not Likely to Succeed

Last Updated March 4, 2021 5:00 PM
Joseph Young
Last Updated March 4, 2021 5:00 PM

Earlier this week Paul Vigna of the Wall Street Journal reported that the launch of Tezos has been delayed due to the conflict between its founders over the ownership and control of Tezos.

Arthur and Kathleen Breitman, the husband and wife partner who have found Tezos alongside Johann Gevers, was said to have sent a letter to the Tezos Foundation’s board, requesting the removal of Gevers from the project through their attorney. Vigna wrote: 

“A lawyer representing the Breitman on Sunday sent a nine-page letter to the foundation’s board, demanding that its founder and president, Johann Gevers be removed, or they would withdraw their support from the project. He has alleged the Breitmans’ involvement in his work ‘was incompatible with the needed independence of the foundation,’ according to a separate letter from a Breitman lawyer, which referenced a Sept. 21 meeting at which Mr. Gevers made the claim.”

But, in an interview with Reuters, Gevers strongly condemned the actions of both Arthur and Kathleen Breitman, describing their plan to remove him from the Tezos project as an illegal coup. Gevers stated: 

“As Arthur has done to others before me, this is attempted character assassination. It’s a laundry list of misleading statements and outright lies.” [Arthur and Kathleen] are attempting an illegal coup. Attempt to control the Foundation as if it were their own private entity… by bypassing the foundation’s legal structure and interfering with management and operations.”

Two US Law Firms Open Investigations Into Tezos

According to Block & Leviton, a Boston-based law firm representing investors for violations of securities laws, revealed that the conflict between the founders of the project has led to the decline of the Tezos token (Tezzies) by around 60 percent, in futures and derivatives markets. Because the launch of the Tezos token has been delayed as a result of the legal conflict between the founders, traders have been limited to trading Tezzies in the derivatives market.

Block & Leviton further emphasized that it has launched an investigation into Tezos on behalf of its investors that have participated in the initial coin offering (ICO) of the project. Restis, another US-based law firm in California, revealed that it has begun to investigate the Tezos project, to prepare a class action lawsuit against the organization.

“The Restis Law Firm, P.C., located in San Diego California, is investigating a class action lawsuit on behalf of U.S. investors in the Tezos ICO. We are interested in receiving feedback from investors to learn about their experience and develop facts for the case,” the Restis team wrote. 

Legality of Investors and ICOs

Whether US securities regulations can apply to Tezos investors remains unclear and ambiguous. Prior to its ICO, Tezos has disallowed US-based investors in participating in its ICO. Hence, it is highly unlikely that US securities regulations can be used against Tezos in a lawsuit. Furthermore, Tezos has described the ICO and the investment it had received as a “non-refundable donation” rather than a distribution of stake or equity in the company, to circumvent US SEC regulations and policies.

Conclusively, it is unlikely that US investors will be able to challenge Tezos in a class action lawsuit because US investors were not allowed to invest in Tezos to begin with, and even if they had, investment in Tezos was described as a donation, which remains outside of the SEC’s jurisdiction.

But, Gevers has officially appealed  to Swiss federal inspectors and requested “the supervisor to intervene, if necessary, to protect the interests of the Tezos ICO participants.

Featured image from Shutterstock.