Tezos ICO Price Slumps After Wave of Law Suits from Investors

The futures price of Tezos is down 60% after getting slapped with news of several mass class action suits by lawyers representing ICO contributors.

The futures price of Tezos is down 60% after getting slapped with news of several mass class action suits by lawyers representing ICO contributors. After raising $232 million of ether and bitcoin in July, the self-amending ledger blockchain project is now in trouble.

Investors are responding to details revealed on Thursday concerning a boardroom wrangle for control over ICO proceeds now valued at $400 million. The proceeds are held in custody by an independent Swiss Foundation, Tezos AG, headed by Johann Gevers as president. Controversy erupted when Arthur and Kathleen Breitman, Tezos CTO and CEO the president of the nonprofit, of mismanaging funds.

The dispute has now put the whole project on ice. While contributors to an ICO typically receive tokens in some weeks or months, Tezos investors are still in the dark about when to expect their promised tokens.

A law firm based out of Boston has stepped to right the damage incurred by investors. Block & Leviton has launched an investigation into the initial coin offering on charges of securities fraud. A memo on the firm's website is reaching out to Tezos investors in a bid to represent as many as possible in a class action suit.

"Block & Leviton LLP has launched an investigation on behalf of investors in the Tezos Initial Coin Offering ("ICO"). If you invested in the Tezos ICO and have questions about your legal rights or if you have information relevant to this investigation, please contact our attorney."

Projects like Tezos skirt securities regulation by only accepting cryptocurrency funds in online crowdfunding events and subsequently dishing out digital tokens to investors instead of shares. This year alone, ICOs have raked in over $ 2 billion in funding primarily due to their supposed unregulated status. 

But it wasn't long before regulators caught wind of the incredulous sums raised from retail investors.

In the last three months, a wave of announcements by financial authorities in China, US, Canada, Hong Kong and multiple countries have cast doubt on the purported unregulated status of ICOs. The US Securities and Exchange Commission in August clarified some tokens indeed fall under federal securities law. If true, any case brought against the Breitman's under US federal law would necessitate a refund. 

Restis Law, another law firm in San Diego, has already requested Tezos to refund all contributions made to the ICO. In a statement, the firm said:

"As time passes, and information continues to come to light, the Tezos Initial Coin Offering ("ICO") is a textbook case of how NOT to raise money for blockchain projects. Luckily for U.S. investors, the federal securities laws allow for a refund."

Tezos investors now have to wait until February 2018, the earliest date suggested by CTO Arthur Breitman for the dispute to resolve and the project to continue development. The other alternative is for a full refund of ICO proceeds if the class action suits prove successful.