ConsenSys CEO Joseph Lubin Faces Lawsuit from Former Employees Over Equity Dilution Claims
Summary:
Over 24 former employees of ConsenSys, an Ethereum infrastructure company, have filed a lawsuit against CEO Joseph Lubin, alleging breach of a 2015 promise not to dilute their equity shares. The ex-staff members claimed their shares became "worthless" when Lubin transferred assets to a new U.S. entity in 2020. Investment bank JPMorgan is also implicated in the case, accused of playing a pivotal role in the asset transfer negotiations.
A new lawsuit has been lodged by over 24 ex-staff members of Ethereum infrastructure company ConsenSys against founder and CEO Joseph Lubin. The plaintiffs assert that Lubin, also a co-founder of Ethereum, broke a promise made in 2015 to not dilute their equity shares. According to documents filed in the New York Supreme Court on Oct. 19, these ex-employees allege they were persuaded by Lubin to join ConsenSys, which he touted as the “cryptocurrency of the future” and the “Google of crypto”, with an assurance that their equity shares wouldn't be diluted. This promise, they allege, was later violated.
The document stated, "The percentage that ConsenSys members receive will not be diluted by additional issuance". The plaintiffs subsequently argued that Lubin not only broke this assurance but financially benefited from doing so, while they received nothing. It stated, “He violated his word, he breached his legal obligations and duties. Lubin got wealthy, plaintiffs gained nothing.”
These former employees, shareholders of Swiss holding company ConsenSys AG, now assert that their shares were made "worthless" after Lubin transferred cryptocurrency wallet MetaMask, along with other assets, to a new U.S. entity in 2020.
The lawsuit has also implicated investment bank JPMorgan as being instrumental in the asset transfer negotiations and in becoming the new equity holder in the new U.S. entity. The plaintiffs claimed,“The details of the negotiations were kept confidential by Lubin, his core team, and JPMorgan, leaving the plaintiffs unaware." They added that, “Many of the initial employees, the plaintiffs in this case, were not transitioned over as equity holders in the new firm. Rather, they retained their shares in the significantly less valuable entity after it was deprived of its assets.”
In a response to Cointelegraph, a representative for ConsenSys refuted the claim, labeling them as "without merit." The spokesperson also accused the plaintiffs of trying to exploit the U.S. legal system for a potential payout after failing to make progress with these "baseless accusations" in a Swiss court for two years.
However, despite ConsenSys's assertion that the legal action in Switzerland was fruitless, the High Court of Zug ruled in favor of the plaintiffs. The ex-employees allege this is further evidence of Lubin's breach of duties.
ConsenSys, which was launched in October 2014, nine months prior to Ethereum blockchain's mid-2015 debut, builds and operates the infrastructure projects that support the majority of the Ethereum network.
The plaintiffs are pursuing damages over six different lawsuits, with the specific amount to be decided at trial.
Published At
10/20/2023 3:11:53 AM
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