After more than two years of litigation the Tezos Foundation has agreed to settle the USD $25 million lawsuit levied against it by several early investors. This move could open the door to a Tezos rally as a key barrier to development may soon be lifted.
LEGAL PROBLEMS HAVE LOOMED LARGE OVER THE PROJECT
Tezos’ ICO in July, 2017, raised USD $232 million. At the time, this was the largest ICO raising of any blockchain project. Optimism for the platform’s future soon abated as disillusioned investors began to sue the foundation, claiming that it had given misleading information on key development goals. These lawsuits eventually consolidated.
In its agreement to settle with the plaintiffs, the foundation maintains that it did nothing wrong. Rather, it asserts that the lawsuit remains an expensive distraction and thus should be settled for the benefit of the platform.
It states on its website:
The Tezos Foundation chose to settle all claims because the Tezos Foundation believes it is in the best interest of the Tezos project and community as a whole.
The Foundation continues to believe the lawsuits were meritless and continues to deny any wrongdoing. However, lawsuits are expensive and time-consuming, and it was decided that the one-time financial cost of a settlement was preferable to the distractions and legal costs associated with continuing to fight in the courts.
Looming over this lawsuit has been the question over whether or not Tezos should be categorized as a security. This issue affects all blockchain assets, and its resolution could play a key role in how development teams raise funds. Blockchain advocates overwhelming argue that cryptocurrencies are not securities, and instead represent a new and unique asset class. Although not directly addressed, the foundation likely chose to settle in part because it feared that the court may not rule in its favor on this important topic.
The settlement must still be approved by the court.