Tezos Foundation, the first blockchain company to be hit with civil claims alleging it violated securities laws in the US, is still facing a class action lawsuit against its Initial Coin Offering (ICO) as a federal court judge has blocked a motion to dismiss the case.
Tezos, whose ICO raised $232 million in July 2017, has been hit with four class-action lawsuits in California, alleging sale of unregistered securities. The suits, filed by numerous Tezos contributors, have now been consolidated into one with a lead plaintiff named Arman Anvari.
According to court documents published on Tuesday, California District Judge Richard Seeborg dismissed Tezos founders' Arthur and Kathleen Brietman's recent attempt to block the lawsuits.
The defendants argued that the ICO did not fall under the US Securities and Exchange Commission’s (SEC) jurisdiction because it was administered by the Switzerland-based Tezos Foundation. However, the judge said the involvement of Brietmans’ US-based company Dynamic Ledger Solutions (DLS) “in establishing and aiding the Tezos Foundation rendered the two entities deeply intertwined, if not functionally interchangeable, throughout the ICO process.”
“This argument is a strong one, and may well threaten Anvari's access to this forum pending discovery. It is not enough, however, to require dismissal or transfer at this juncture,” Seeborg stated.
The judge further noted that Anvari, who invested 250 Ethereum (ETH) in Tezos ICO, made the transaction from the US, using a website hosted on a server in Arizona, run primarily by Arthur Brietman in California. Furthermore, the plaintiff learned about the offering from marketing that “almost exclusively” targeted US residents.
The court filing mentions two further defendants — Tim Draper, a venture capitalist who publicly backed the project, and cryptocurrency brokerage firm Bitcoin Suisse, which provided intermediary services to some of Tezos ICO contributors.
The motion by Draper has now been granted with leave to amend, while Bitcoin Suisse has been wholly dismissed as a defendant, as it does “not appear to be a key player in this action.”