Tezos founders Arthur and Kathleen Breitman are in the middle of yet another lawsuit. The firm raised $232 million from investors who later came to find out that the funds were classified as non-refundable donations. This is the second lawsuit against the couple within a period of less than one month.
Another Chapter in the ICO Frenzy
ICOs have been on the receiving end recently of a governmental and regulatory backlash. They are popularly used by technology companies to raise capital by issuing cryptocurrency tokens which are often product or services-specific in return for the investmtents made.
While the Tezos token sale played its part in setting a frenzied tone for the ICO phenomenon with one of the largest ICO fundraisers to date, investors are yet to receive any digital coins in return. The transaction system proposed in the white paper for the project also lacks a clear end date.
The second lawsuit is seeking classic action and alleges that the firm contravened US securities laws by selling unregistered securities. They are also accused of misrepresenting facts and misleading investors. Plaintiffs want the firm to refund the capital and pay damages.
The general view is that a majority of ICOs in fact constitute securities. If this view holds true for the Tezos court battle, it might actually end up being a prima facie case. Kathleen Breitman is said to have compared the crowdfunding mechansim to contributions solicited by Evangelical television channels and dismissed the idea that the tokens were securities.
Such allegations have served to fuel the debate once more in relation to a lack of a regulation framework for ICOs and cryptocurrencies more generally. How the lawsuit will play out might have long serving effects on the digital currency community.