The Tezos Foundation can finally heave a sigh of relief and continue its operations after a lawsuit targeting its Initial Coin Offering (ICO) has successfully been put to bed. On Friday, Judge Seeborg of the Northern District Court of California approved a $25 million settlement that puts an end to the three-year conflict between Tezos and several of its investors.
Possible Securities Fraud
According to the judgment, the court will distribute the funds amongst every individual and entity that participated in the 2017 ICO and who sold their assets at a loss before November 25, 2019. People who didn’t sell their tokens before November 25, as well as those who can’t access their tokens due to lost passwords, will also get funds.
The case began in October 2017, when law firm Block & Leviton revealed that it had opened an investigation into the Tezos ICO for possible securities fraud. By mid-December of that year, the Boston-based law firm had sued the principal actors in the ICO.
At the time, however, the Tezos Foundation and Dynamic Ledger Solutions — a company created by Tezos co-founder Arthur Breitman — had already been the subject of two other lawsuits. These suits were also filed in the Federal District courts in Florida and California.
By August 2018, the suits were consolidated into one, which the Northern District Court of California had to try. While Tezos had wanted to dismiss it, Judge Seeborg refused to grant the company’s wishes.
With the court refusing to dismiss the case, the Tezos Foundation announced that it planned to settle in March 2020. According to a blog post, the Foundation asked for a one-time settlement, explaining that it believed the move was more profitable than paying the legal fees that would result from a drawn-out battle.
Court Approval Seals the Deal
In May, Judge Seeborg had given preliminary approval for a $25 million settlement. Today’s judgment confirms it and brings an end to the ordeal.
As part of the judgment, all parties eligible for the funds will have to file a claim to get a share in the settlement before October 16. The counsel for the plaintiffs would also receive attorneys’ fees, which are equal to a third of the entire settlement fees — as well as about $203,000 worth of litigation expenses that the Tezos Foundation will have to pay separately.
Plaintiffs will relinquish their right to make any future claims against the blockchain company and any other defendants. Apart from the settlement’s financial benefit, the Tezos Foundation will also be incredibly happy that the case is coming to an end without the Securities and Exchange Commission (SEC)’s involvement. Plaintiffs in the Florida-based case had tried to get the regulator involved in it, but it refused their request for information on the grounds that releasing any documents could impede any enforcement activities.
Given the SEC’s reputation for being tough on crypto companies, the Tezos Foundation would be happy to escape its crosshairs.