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Ethereum Equity Lawsuit: Allegations and Actions

Martin Walker
Oct 21, 2023 at 01:19 pm

A fresh lawsuit has recently emerged, and it has sent ripples through the world of blockchain and cryptocurrency. In a legal battle that has pitted more than twenty former employees against Joseph Lubin, the co-founder of Ethereum and CEO of the Ethereum infrastructure firm Consensys, allegations have surfaced regarding a breach of trust. These ex-staff members claim that Lubin failed to uphold a commitment he made back in 2015, which centered around safeguarding the value of their equity shares. 

The story unfolds as we delve into the past, when Lubin, who also played a pivotal role in the founding of Ethereum, managed to lure in a group of talented and highly motivated individuals to join the ranks of Consensys in late 2014. He painted a vivid picture of Consensys as the "future of cryptocurrency" and even compared it to the "crypto equivalent of Google." However, it's in the fine print of that era that the plaintiffs have found their cause for concern. Lubin supposedly put his promise not to dilute employee equity shares in writing, expressing his intent that "the percentage Consensys members receive will not be diluted by additional issuance."

Fast forward to the present, and the former employees allege that not only did Lubin break this promise, but he also profited handsomely while they were left with nothing. Their claim is that Lubin not only breached his word but also violated his legal obligations and duties. They accuse him of amassing wealth while they were left empty-handed.

Adding to the complexity of this case, the plaintiffs, who once held shares in the Swiss-based holding company Consensys AG (formerly known as Consensys Mesh), assert that the value of these shares plummeted when Lubin orchestrated the transfer of assets, including the cryptocurrency wallet MetaMask, to a new U.S.-based entity in 2020.

Excerpt from the lawsuit brought by former Consensys employees. Source: New York Supreme CourtExcerpt from the lawsuit brought by former Consensys employees. Source: New York Supreme Court

Furthermore, the plaintiffs have included investment banking giant JPMorgan as one of the seven defendants in this legal dispute. They allege that JPMorgan played a significant role in the asset transfer negotiations and ended up becoming a new equity holder in the U.S. entity. The plaintiffs argue that Lubin, along with his inner circle and JPMorgan, kept the negotiations shrouded in secrecy, leaving them in the dark regarding key developments.

Consensys contends that the claims made by the plaintiffs lack merit

In response to these allegations, Consensys has firmly refuted the plaintiffs' claims, dismissing them as frivolous. A spokesperson for the company pointed out that the plaintiffs had already pursued their claims for two years in a Swiss court without making headway. They now seem to be trying their luck in the U.S. legal system, attempting to entangle not only Consensys Software but also other unrelated parties in this complex litigation. The spokesperson confidently stated that the plaintiffs, who were never employees of Consensys Software, are unlikely to achieve their goal of benefiting from the success of others.

Despite the setbacks the plaintiffs faced in the Swiss legal system, they can take some comfort in the fact that the High Court of Zug in Switzerland ruled in their favor, supporting their stance that Lubin had indeed breached his fiduciary duties.

It's important to note that Consensys, a company founded in October 2014, played a pivotal role in the development and hosting of infrastructure projects that underpin a significant portion of the Ethereum network.

As the legal battle intensifies, the plaintiffs are pursuing damages based on six separate legal claims, with the specific amount to be determined during the trial. This lawsuit has certainly stirred up controversy and raised questions about the responsibilities and obligations of company leaders in the world of blockchain and cryptocurrency.

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