Saturday, July 20, 2024

A legal battle has emerged as over twenty-five early employees of Consensys, a prominent blockchain software company, have initiated legal proceedings against Ethereum co-founder Joseph Lubin, Consensys, and several other parties. The plaintiffs contend that Lubin breached contractual commitments pertaining to equity compensation that were made when these employees joined the company during its nascent stages in 2014.

Ethereum Co-Founder Joseph Lubin Faces Legal Action in the U.S.

This lawsuit, which was filed in a New York court, coincides with Consensys’ transformation from its initial experimental structure into a more conventional, centralized corporation, presently valued at over $7 billion. On October 19, 2023, the lawsuit was formally lodged by 27 former Consensys employees.

The legal action lists Joseph Lubin, Consensys, and JPMorgan Chase as defendants. The plaintiffs assert that Lubin enticed them to become part of Consensys during its early years by offering them equity in the parent company, Consensys AG.

Former employees claim that Lubin assured them that this equity would remain unaffected by dilution. However, in 2020, Consensys underwent a restructuring process, reportedly transferring crucial assets to a new Delaware-based entity known as Consensys Software Inc. (CSI). According to the plaintiffs, they were largely excluded from this restructuring, resulting in their shares in the original Consensys AG losing significant value.

The lawsuit outlines, “Lubin made a similar offer to each plaintiff in connection with his or her joining Consensys; plaintiffs accepted the deal, and an agreement was formed.” Lubin is alleged to have violated an agreement that early employees would “experience successes and setbacks together with Lubin and Consensys.” The suit further contends that “Financial interests took precedence over the founding employees.” Consequently, it seeks compensation for breach of contract and fiduciary responsibilities.

This is not the first time that Consensys and Lubin have faced such allegations. On March 1, 2022, a group of thirty-five former employees, representing more than half of all recognized Consensys AG (CAG) stakeholders, filed a petition for an exhaustive review in accordance with article 697a and related sections of the Swiss Code of Obligations. The purpose was to thoroughly investigate substantial inconsistencies within CAG.

A spokesperson for Lubin and Consensys vehemently refuted these claims, describing them as “frivolous” in an email statement to Bloomberg. The spokesperson emphasized, “After two years of making no headway with their baseless allegations against Consensys Mesh in a Swiss court, the plaintiffs now believe that their unfounded claims have a better chance of yielding financial gains if they bring their case to U.S. courts and embroil Consensys Software and other unrelated parties in litigation.”

Please feel free to share your thoughts and perspectives on this lawsuit against Lubin and Consensys in the comments section below.

Frequently Asked Questions (FAQs) about Lawsuit

What is the lawsuit about?

The lawsuit involves allegations made by more than two dozen early employees of Consensys against Ethereum co-founder Joseph Lubin and Consensys. They claim that Lubin breached contractual promises related to equity compensation that were made when they joined the company in its early years.

When was the lawsuit filed?

The lawsuit was filed on October 19, 2023, in a New York state court.

Who are the defendants in the lawsuit?

The defendants named in the lawsuit are Joseph Lubin, Consensys, and JPMorgan Chase.

What do the plaintiffs allege Lubin promised them?

The former staff members allege that Lubin promised them equity in the parent company, Consensys AG, and assured them that this equity would not be diluted.

What happened during Consensys’ restructuring in 2020?

In 2020, Consensys underwent a restructuring process and transferred key assets to a new entity called Consensys Software Inc. (CSI). The plaintiffs claim they were largely excluded from this restructuring, which resulted in the devaluation of their shares in the original Consensys AG.

What are the primary claims in the lawsuit?

The lawsuit primarily seeks damages for breach of contract and fiduciary duties, alleging that Lubin broke a deal where early employees were supposed to “win or lose – together – alongside Lubin and Consensys.”

Has Consensys and Lubin faced similar allegations before?

Yes, in a previous instance on March 1, 2022, a group of former employees lodged a petition for a comprehensive review under Swiss law to investigate discrepancies within Consensys AG (CAG).

How have Lubin and Consensys responded to these allegations?

A spokesperson for Lubin and Consensys has refuted the allegations, describing them as “frivolous.” They believe that the plaintiffs are attempting to gain financial benefits by bringing the case to U.S. courts after facing challenges in Swiss courts.

What is the current status of the lawsuit?

The lawsuit is currently ongoing in a New York state court, and its outcome remains to be seen.

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1 comment

FinancialWhiz October 22, 2023 - 12:24 am

27 formr Consensys staff sae Lubin broke deal on equiti. Not good!

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