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Tezos Class Action Lawsuit – Just Another Crypto Scam?

Tezos, a blockchain technology project that made headlines in July by raising $232 million, has been hit with numerous class action lawsuits this past month after its founders, the Breitmans, promised to build a blockchain with a revolutionary new governance model that would avoid the downfalls which plagued Bitcoin over the last couple of years. Instead, Tezos has not quite panned out, nor kept up its promises, engulfing itself in some major controversy since its initial fundraiser ended; hence the recent talk of a Tezos Class Action Lawsuit. Now, the couple is locked in a bitter conflict with Johann Gevers, the man they picked to lead the Tezos Foundation, and things are not looking good.

ArsTechnica reports that the big question hanging over the Tezos project is whether its so-called initial coin offering violated US securities laws. Those laws require companies to register with the Securities and Exchange Commission (SEC) before they can offer securities to the public. The lawsuits argue that, legally speaking, the Tezos crowdfunding campaign was a sale of securities, and so the Breitmans broke the law by ignoring SEC rules. Naturally, there would haven’t been much of a reason to file a lawsuit if Tezos turned out to be a success, however, the launch of the coin is now months overdue, and investors are beginning to wonder if anything will ever come of their investment.

Recently, the prominent Wall Street based law firm Levi & Korsinsky got in on the Tezos action as well, putting out their own press release. The firm also reached out to us to share their views on the case. After discussing the cryptocurrency world at length (to which their representative seemed very knowledgeable), they left us with the assurance of tighter, stronger, and more direct allegations in their complaint, closing the door on the shakiness of the cases already filed. To contact Levi & Korsinsky about this matter, or to discuss your options, simply click here. The deadline for this action is January 25, 2018, so time is running out! If you would like to discuss your options, please contact the firm immediately.

Below is a copy of their complaint for your convenience:

Tezos Sold On A Fictional Platform

In a white paper from 2014, Tezos founder Arthur Breitman argued that Bitcoin had a poor governance model which requires everyone in the network to follow the same set of rules (rules that are not easy to change), which is a problem that has become more and more prominent over the last three years, as the cryptocurrency grows and grows.

Breitman attempted to solve this issue when he developed a blockchain protocol capable of modifying its own rules. The Tezos protocol is said to have multiple layers, with a low-level “network shell” providing generic blockchain functionality but leaving most of the important decisions to higher levels of the stack. Tezos is supposed to have built-in mechanisms for modifying the rules of these higher-level functions. A Tezos user can propose a modification to the rules, which can be accepted or rejected by other users. In theory, this should make the network much more flexible than conventional blockchain networks. The big problem is that the Tezos network doesn’t exist yet. People who bought into the July presale were buying the right to receive units of the Tezos currency once the network became operational, says ArsTechnica.

The lawsuits charge that the Breitmans misled investors about how long this would be. In a May blog post, Arthur Breitman wrote that “all of the functionality described in the whitepaper has been implemented to this date, except for gas metering.” The big remaining tasks, he said, were “finishing a security addition,” “optimizing smart-contract storage,” and “testing our network on a large scale and performing external security audits.” In this post, Breitman predicted the Tezos network would be up and running “in a three- to four-month period.” He said it might take as long as six months to finish, though he added that, “Based on (his) assessment of the remaining development that does not seem likely, but it’s not impossible.”

That post was written six months ago. The Breitmans are now saying that they expect to launch the network next February, and they acknowledge that it could take even longer.

Tezos Claimed Investments As Donations

Another major issue here is that people who invested in the Tezos presale were buying the right to acquire Tezos currency in the future, once the network was up and running. Plaintiffs say this is evidence that the pre-sale was really a stock offering, not much different from a corporate IPO. US law requires anyone who offers stock to the public to register with the Securities and Exchange Commission, which the Breitman’s did not do.

Instead, they skirted those requirements by describing investors’ purchases as donations to the Tezos Foundation.

“What we’re going to do is allow as many people who want to buy into the crowdsale over a two-week period,” Kathleen Breitman told Reuters in May. When Reuters asked Tim Draper, one of the biggest early investors in Tezos, how much he “donated” in the fundraiser, he responded, “You mean how much I bought? A lot.”

The US Securities and Exchange Commission is charged with enforcing securities laws. So far, the agency has enforced the rules with a light hand. In July, days after the Tezos fundraiser had ended, the SEC ruled that a 2015 fundraising effort called the DAO had violated securities laws. But the SEC decided not to press charges in that case, merely warning that future crowdsales could get their organizers in legal hot water, reports ArsTechnica.

However, pissed off Tezos investors are not waiting for the SEC to crack down on Tezos, but instead filing their own lawsuits based on the project’s alleged violation of securities laws. The lawsuits against Tezos point to SEC statements warning that unregistered ICOs could run afoul of securities laws.

These lawsuits are no joke, either, leaving stakes quite high for Tezos. If Plaintiffs are successful, Tezos could be forced to return the money they raised in the crowdsale, and they could face further action from the Securities and Exchange Commission. This case may also have broader significance for the cryptocurrency world. Tezos was one of the most successful coin offerings conducted in 2017, but there have been many others like it. Most of them have not registered with the SEC, and others have offered the public tokens on networks that haven’t been created yet. If the courts decide that Tezos violated securities laws, it could put many of this year’s other ICOs in legal jeopardy. The SEC hasn’t begun prosecuting anyone in the cryptocurrency world for violating securities laws, but it could start doing that at any time. And a court ruling against Tezos could put pressure on the SEC to act.

Editor’s note on the Tezos Lawsuit:

This piece is written about recent and, likely, future class actions concerning Tezos. If you have been affected by the Breitman’s actions, you too are eligible to take legal action, which may eventually lead to receiving compensation that the court may award.

If you have any questions concerning this process or wish to speak with a law firm that has either filed or intends to handle this matter, please feel free to contact us via email at

Similarly, if you believe to have been affected by the actions above, please contact us immediately via our complaint portal or directly through email at You can also sign on to this class action here.

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