SAN FRANCISCO (CN) – Investors dissatisfied with the blockchain platform Tezos moved Friday to settle a raft of lawsuits against the company and its co-founders for $25 million.
The money purports to resolve all pending litigation against Arthur and Kathleen Breitman, their company Dynamic Ledger Solutions, and Tezos Stiftung (Tezos Foundation), a Switzerland-based nonprofit that controls the money.
In the summer of 2017, the Breitmans raised the equivalent of $232 million from investors for Tezos, a virtual ledger (blockchain) that keeps track of a digital currency called “tez,” “tezzie,” or “tokens.”
Investors purchased tokens using bitcoin and Ethereum – a crowdfunding method known as an “initial coin offering.”
In October 2017, a media outlet reported on rumored infighting between the Breitmans and Tezos Foundation president Johann Gevers. Tezos oversaw the fundraiser.
Investors began to fear that the blockchain project would be delayed and that they might not reap as much of the profits as they expected. There was also a misunderstanding over whether the initial coin offering (ICO) was an investment or a donation.
The Breitmans claimed the ICO was not an investment scheme and that they have no obligation to provide Tezos tokens to contributors.
But the funders countered their contributions were investments that required the defendants to register with the U.S. Securities and Exchange Commission before accepting money.
They also wanted their bitcoin and Ethereum back.
Four class actions were filed and later consolidated, and negotiations for a settlement started at the end of 2018.
One major sticking point was what, if any, damages the Tezos funders could recover given the unpredictable value of cryptocurrency.
“In particular, plaintiffs were aware that defendants would argue, for instance, that the transactions at issue did not involve ‘securities’ as defined under the federal securities laws, and that such transactions were otherwise exempt from registration,” the settlement motion says. “Plaintiffs were also aware that the value of the blockchain assets at issue could rapidly fluctuate. Thus, plaintiffs knew that, even if they were successful, even after trial and appeals, they might actually recover substantially less than the amount obtained in this settlement for the benefit of the settlement class.”
The “settlement class” includes roughly 30,000 investors who participated in the ICO between July 1, 2017, and July 13, 2017. The class attorneys seek roughly $8.3 million of the $25 million in fees.
The settlement still needs to be approved by a federal judge. Lawyers for both sides did not respond to emails seeking comment Friday.