Tezos Foundation opts to settle all class action lawsuits stemming from its 2017 token sale

The Tezos Foundation has entered into a settlement, pending court approval, of all the class action lawsuits related to the project’s 2017 initial coin offering (ICO), which raised $232 million. The foundation still denies any wrongdoing, calling the suits “meritless.” But it decided that issuing a one-time payment instead of continuing a costly and distracting legal battle was in the “best interest of the Tezos project and community as a whole.”

Why it matters:

• If approved, this settlement would end a multi-year negotiation between the two sides. Token sale investors first filed these lawsuits back in Oct. and Nov. 2017 after Reuters revealed that a “backroom battle” between the Tezos founders and the president of the Tezos Foundation would delay project development. These investors later consolidated their lawsuits in Apr. 2018, seeking $25 million in compensation from Tezos for holding an unregistered securities offering. In defense, the Tezos Foundation claims the token sale was not a securities offering as it classified any contributions as donations and XTZ handouts as gifts to those who donated.
• A settlement figure in the range of $25 million would not be damaging to Tezos. The foundation recently revealed its treasury held ~$635 million as of Jan. 31, 2020. This amount might be around $500 million due to the recent market selloff. But a payout as high as $25 million would only be ~5% of the foundation’s holdings.