The Tezos Foundation has opted to settle a class action lawsuit against the project while continuing to deny wrongdoing rather than face mounting legal bills. Tezos faced multiple lawsuits in late 2017 at the same time as a power struggle raged to control the company and the massive funds backing it up, with the foundation deciding to cut its losses and commit to settlement while still calling the claim “meritless”.
Tezos’ Power Struggle
Tezos was one of the biggest ICOs of 2017, raising $232 million, but an unseemly fight soon ensued between Tezos’ two founders – Arthur and Kathleen Breitman – and Johann Gevers, the president of the Tezos Foundation. Gevers was accused of drawing up his own contract and awarding himself a disproportionately large compensation package, to which Gevers himself responded that his character was being attacked.
Gevers finally left the board in February 2018, but not before the project’s launch had been massively delayed and its reputation dragged through the mud.
Lawsuits Pile Up
In late 2017, the company, and by extension the Breitmans, were hit with four separate lawsuits by disgruntled investors who alleged that Tezos defrauded and misled ICO participants by raising the funds in the form of non-refundable donations. This, they claim, broke US securities laws. The separate cases were packaged up into January 2018, which is the case Tezos is now seeking to settle.
Tezos released a short statement on their decision late last week, reasoning that seeking a settlement was in the best interests of the project and the foundation:
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.
Prior to the recent crash, Tezos had seemed to have overcome its difficulties, with its token price performing remarkably well and its platform finding several utilities, including real estate tokenization, although in February, ratings agency Weiss labelled their scaling efforts “unimpressive and lackluster”.