Tezos Saga Continues as Swiss Foundation Asked to Cover Legal Costs
Buyers in the blockbuster Tezos ICO last July are now regretting their enthusiasm. In the latest update to the saga, the projects two founders and their company are trying to get the Swiss Tezos Foundation to cover their legal costs — against a lawsuit by frustrated token buyers.
Foundation Holds the ICO Funds
The not-for-profit Tezos Foundation was created to play a governance role in the project, and holds the keys to the $232 million USD in ICO-raised funds. Reuters reported that if the Foundation were to cover legal costs, it would be using funds contributed by the very people suing the company.
Development delays, and an ongoing dispute between founders Arthur and Kathleen Breitman and Tezos Foundation president Johann Gevers, mean token buyers have received nothing so far.
The platform itself — a multi-purpose blockchain-based network ironically aimed at crowdfunding — has still not gone live. No platform means no tokens (“Tezzies”) which means no trading. ICO buyers looking to make a quick 100x profit are sorely disappointed at the missed opportunity, given the competition. Even keeping the BTC or ETH they used to buy Tezzies would have provided a handsome return since July.
The Breitmans, their Delaware-registered company Dynamic Ledger Solutions (DLS) and the Swiss Tezos Foundation are all defendants in at least two class-action lawsuits.
Token Buyers Unhappy at Not Knowing Full Details
At issue now are the Swiss Foundation’s legal obligations under what Reuters called “arcane” local laws governing nonprofit foundation structures.
Under a contract between DLS and the Tezos Foundation, two things were supposed to happen before the fundraiser: the Swiss regulator for foundations approving the deal, and Tezos’ software code being put in the public domain.
Neither of those has happened, despite the ICO being long over. The Swiss regulator said it does not review private legal contracts. The Foundation has the code, but is not releasing it for some reason.
Token buyers did not know about either of those two conditions, which their lawyers say were important pieces of information as they could have (and have) caused the project to stall. But was Tezos legally obligated to reveal this, if ICO buyers are not “investors”?
The plaintiffs in the lawsuits say token buyers were investors, and the tokens unlicensed securities. However the buyers’ agreement states their contributions were merely non-refundable donations to the Foundation.
ICOs Are Totally Not Investments, OK?
ICO organizers usually state clearly that tokens are not investments or securities, in the hope of skirting securities laws in various countries. However experts and industry bodies in countries like Japan have warned that may not be enough — investment or even consumer laws may still apply.
Casual examination of ICO-related conversation online shows token buyers are looking for some kind of financial return from their outlay.
For outsiders, it’s a fascinating example of what happens when blockchain technology tries to merge with traditional financial law in a place like Switzerland.
Reuters has followed the story closely, though none of the warring parties will speak on the record at this stage. Arthur Breitman last gave a public update at Money20/20 in Las Vegas in October, telling stakeholders to “bear with me”.
Unfortunately for Tezos ICO buyers, it now looks like the project is more likely to spend time and energy getting bogged down in legal disputes than producing software. This is unlikely to produce anything of value long-term.
By participating in the class action suits, token buyers may be setting themselves up for another disappointment down the road.
What’s your take on Tezos? Could it have succeeded or will it still? Let’s hear your thoughts in the comments.
Images via Pixabay, Tezos, Reuters