1. Home
  2. News

Judge Refuses to Dismiss Class Action Lawsuit Against Tezos ICO Founders

Judge Refuses to Dismiss Class Action Lawsuit Against Tezos ICO Founders

The judge hearing a class action lawsuit against the founders of Tezos, which held the largest initial coin offering (ICO) in the world to date in July 2017, turned down a motion filed by the defendants to dismiss the lawsuit.

In court documents published on August 7, U.S. District Judge Richard Seeborg of the Northern District of California refused to dismiss plaintiff Arman Anvari’s suit, which consolidates various prior class action lawsuits filed by various Tezos contributors against defendants Arthur and Kathleen Breitman, their US-based firm Dynamic Ledger Solutions (DLS), and the Zug, Switzerland-based Tezos Foundation.

The defendants are being charged with two counts of securities law violation, including violating sections 5, 12(a), and 15 of the Securities Act. Importantly, the docket states that despite being called a “crowdsale” and “fundraiser” by the defendants, the Tezos ICO “had all the hallmarks of a securities offering.” The defendants “attempted to avoid the reach of U.S. securities law by characterizing the Tezos ICO as the solicitation of “contributions,” or “donations,” as opposed to the solicitation of investments in securities.”

According to the docket, 30,317 investors participated in the Tezos ICO, contributing 65,681 Bitcoin and 361,122 Ethereum to the project, which was worth $232 million in July 2017 when the ICO was conducted, reaching a maximum value of $1.52 billion on January 7, 2018, and now worth about $630 million. Upon completion, the Tezos ICO was the largest token offering ever conducted.

The Breitmans filed a motion against Anvari’s complaint, arguing that the Tezos ICO did not fall under the jurisdiction of the US Securities and Exchange Commission (SEC) because it was administered by the Swiss-based Tezos Foundation. However, Judge Seeborg dismissed this motion on the grounds that much activity for the ICO was in fact conducted in the US.

According to Judge Seeborg, the involvement of the Breitman-controlled US company DLS in establishing and aiding the Tezos Foundation “rendered the two entities deeply intertwined, if not functionally interchangeable, throughout the ICO process.” “Try as the Foundation might to argue that all critical aspects of the sale occurred outside of the United States, the realities of the transaction (at least as alleged by Anvari) belie this conclusion.”

Anvari, a former Perkins Coie associate in Chicago, invested 250 ETH in the Tezos ICO on July 8, 2017.. The transaction was hosted on an Arizona-based server run by Arthur Breitman from California. Judge Seeborg also added that Anvari “presumably” learned about the Tezos token offering from “marketing that almost exclusively targeted [US] residents,” and his ETH  contribution “was validated by a network of global “nodes” clustered more densely in the [US] than in any other country.”

Two other defendants, venture capitalist Tim Draper and Bitcoin Suisse AG, two other players involved in the Tezos ICO, have been dismissed from the lawsuit.

Almost one year after their ICO concluded, the Tezos Foundation launched its beta network on June 30, calling the move an “inflection point” for the project. The Winklevoss twins, early investors in Bitcoin, quietly added Tezos to their portfolio on July 10.

09 Aug 2018

Subscribe to our newsletter

Our newsletters are sent on a regular basis and are aiming to provide you most overall market situation

Latest news

New Token Listings: Blockpass and Provoco

Trading pairs of initial coin offer...
19 Oct 2018

ICORating Weekly Report: 41st Week of 2018

This report includes data on severa...
19 Oct 2018

Security Token Future Conference Co-Hosted By ICORating A Great Success

ICORating co-hosted the global Secu...
19 Oct 2018

Gates Foundation Partners With Blockchain Startup Coil

The Gates Foundation has announced ...
18 Oct 2018

New Token Listing: Alt.Estate

A trading pair of initial coin offe...
18 Oct 2018

Crypto Market Prices Could Increase Tenfold In Coming Years

The cryptocurrency market could see...
17 Oct 2018

New Token Listings: UbiatarPlay, Menlo One and Tezos

Trading pairs of initial coin offer...
17 Oct 2018

OKEx Listed Four Stablecoins Simultaneously

The Hong Kong-based cryptocurrency ...
17 Oct 2018

Telegram’s Blockchain-Based Platform Almost Ready

TON, a blockchain-based platform fr...
17 Oct 2018