Tezos, the technology project that raised $232 million via an initial coin offering in July, is being sued in a class-action lawsuit.
Reuters, citing a lawsuit filed on Oct. 25 in California Superior Court in San Francisco, argues the people behind Tezos violated U.S. securities laws and defrauded investors in its ICO because it hasn’t issued any digital coins. What’s more, the lawsuit contends Tezos told participants that they were making a donation and that they may never receive any tokens as a result of investing in the ICO.
The defendants include the co-founders of the project, Kathleen and Arthur Breitman; their Delaware-based company, Dynamic Ledger Solutions; and Strange Brew Strategies, a communications company that was hired to sell the venture to investors. Additional defendants include the Tezo Foundation, a Swiss entity that the Breitmans created to handle the ICO, as well as its president Johann Gevers.
Brian Klein, an attorney for the couple, told Reuters the lawsuit was without merit and that the Breitmans plan to “aggressively defend themselves.”
According to Reuters, the lawsuit was prompted by an investigation by the news agency. An Oct. 18 report said that Gevers and the Breitmans are fighting over control of Tezos, which has resulted in significant delays to the venture. The goal of the venture is to create a computerized network for transactions that rely on blockchain technology, which is the underpinning for bitcoin and other cryptocurrencies.
The plaintiffs are seeking a refund as well as damages. The lawsuit contends that the company sold unregistered securities. Other law firms told Reuters they are looking into the ICO for potential lawsuits.
Ever since ICOs blasted on the scene, enabling startups to make millions of dollars, regulators around the globe have been warning about the risks this form of fundraising poses to investors. China has banned ICOs altogether, and governments from the U.S. to Russia have warned about the practice.