Tezos has added a new episode on its list of controversies, this Wednesday. Federal Judge Richard Seeborg, assigned to the northern district of the state of California, dismissed an appeal filed by the foundation whose purpose was to clear a class action lawsuit. Allegedly Tezos Foundation has violated the securities laws of the United States.
The court’s decision on the controversial case is the most recent setback for the Arthur and Kathleen Breitman, creators of the project and the American company Dynamic Ledger Solutions (DLS), which owns the intellectual property and rights of all products linked to Tezos.
The dispute occurred because the investors who participated in the initial coin offering (ICO) of Tezos, declared that the company tried to avoid the securities laws of the United States, related to its ICO, through the “donation” or “contribution” instead of being considered as securities investments.
The investors claimed that the event had all the characteristics of a securities offering, so it had to be registered and regulated by the Securities and Exchange Commission (SEC).
However, the lawsuit is complicated because the Tezos ICO was completed during the first week of July, while the first report published by the SEC on regulatory matters was dated on July 25, which means that it is unlikely that the case will have a retroactive effect.
Tezos has stressed that the US laws should not apply since the Tezos Foundation was founded and directed its operations in Switzerland. However, this aspect was dismissed by Judge Seeborg.
The voice of the investors in the collective lawsuits is Arman Anvari who, according to the file, invested 250 ETH in the project.
The judge dismissed this argument and emphasized that Anvari’s transaction was hosted on an Arizona server, delivered to Arthur Breitman who was in California. Furthermore, the marketing campaign was targeting the residents of the United States exclusively.
“DLS’s involvement in establishing and aiding the Tezos Foundation rendered the two entities deeply intertwined, if not functionally interchangeable, throughout the ICO process,” said the Judge.
Tezos’s drama began in October 2017 when Breitman issued a complaint in which they indicated that the project did not have the expected progress because the president of the Tezos Foundation, Johann Gevers, allegedly has used ICO funds to his benefit.
The controversy escalated when a Swiss financial services provider specializing in cryptocurrencies, Bitcoin Switzerland AG, acted as an intermediary in the Tezos ICO and announced that it was not possible to reimburse users the invested money.
Despite all the problems and after months of delays, Tezos launched its test net on June 30.