SEC Fears Obstruction If Tezos Project Documents Released

The United States Securities and Exchange Commission (SEC) has denied a public information request for documents related to blockchain startup Tezos’ cryptocurrency project, saying relinquishing such documents could impact either an investigation or enforcement actions.

According to Reuters reports late last week, the SEC declined to provide the materials, requested by lawyer David Silver, through a letter. Silver represents a group of plaintiffs who are claiming Tezos defrauded them during its fundraising activities back when the firm raised $232 million in July 2017.

The SEC cited an exemption enabling it to not release documents if it believes said information could interfere with enforcement actions. The organization also noted the move should not be interpreted to mean any illegal actions took place, and did not state Tezos was under investigation.

Silver supplied that letter to Reuters.

The project has been locked in a battle for control between its founders, Arthur and Kathleen Breitman and Zug-based Tezos Foundation president Johann Gevers. The Breitmans own the Tezos source code through the Delaware-based company they control, but the Tezos Foundation controls all fundraisers’ proceeds. Former foundation board member Guido Schmitz-Krummacher resigned because he was frustrated by the internal fighting.

Gevers is able to nominate Schmitz-Krummacher’s replacement under the foundation’s bylaws. If the third board member votes against the candidate, Gevers can cast an overriding vote.

The standoff has delayed the Tezos project’s launch, which resulted in a class-action lawsuit filed on Oct. 25 in the San Francisco branch of the California Superior Court. The suit argues that Tezos violated U.S. securities laws and defrauded investors in its initial coin offering (ICO) because it hasn’t yet issued any digital coins. In November, Bitcoin Suisse, the Swiss cryptocurrency broker that helped the blockchain startup raise the $232 million, said it was not aware that any of the invested funds had been mismanaged, lost or put at risk by Tezos’ founders.