Several ex-employees of ConsenSys have initiated legal proceedings against the firm’s founder and CEO, Joseph Lubin, accusing him of reneging on a commitment made in 2015 to prevent the dilution of their equity.
The lawsuit, instituted in the New York Supreme Court on October 19, alleges that Lubin went against previous affirmations by reducing the equity stakes of former employees.
The litigants argue that Lubin persuaded them to onboard ConsenSys towards the end of 2014 by portraying the company as the “cryptocurrency’s future” and likening it to the “crypto version of Google.”
Lubin, during this period, allegedly formalized a pledge in writing, asserting he would maintain the equity percentages of ConsenSys members untouched by subsequent share issuances, stating explicitly, “It is my intention that the percentage ConsenSys members receive will not be diluted by additional issuance.”
Lubin Profited from Diluting Employees’ Equity
The aggrieved ex-employees contend that Lubin didn’t just break his initial promise but also reaped substantial financial benefits at their expense.
They detail that their stake in the Swiss-based holding entity, ConsenSys AG (previously known as ConsenSys Mesh), plummeted to insignificance after Lubin strategically shifted key assets, one being the notable cryptocurrency wallet MetaMask, to a freshly established entity in the U.S. during 2020.
The lawsuit implicates seven entities, with JPMorgan being a notable mention. The bank is accused of orchestrating the asset transfer negotiations alongside Lubin.
The plaintiffs claim that the intricacies of these negotiations were shrouded in secrecy, orchestrated by Lubin, his close confidantes, and JPMorgan, leaving them completely uninformed.
While Lubin transitioned assets, he allegedly bypassed the consideration of bringing early employees, such as the plaintiffs, onboard as equity stakeholders in the newly formed company. As a result, they were left with shares in a now-depleted entity, bereft of its once-valuable assets.
ConsenSys Calls Allegations Frivolous
ConsenSys has been quick to rebuff these allegations, dismissing them as “baseless.” A representative from ConsenSys commented that the complainants are redirecting their legal claims to U.S. jurisdictions after facing roadblocks in Swiss legal channels over the past couple of years.
The spokesperson implied that the plaintiffs are aiming for a financial windfall by ensnaring parties unrelated to the core issue, including ConsenSys Software, in the lawsuit.
While ConsenSys maintains that the Swiss legal proceedings bore no fruit for the plaintiffs, the Zug High Court in Switzerland ruled otherwise. It sided with the plaintiffs, affirming that Lubin did indeed violate his commitments.
Established in October 2014, ConsenSys holds a pivotal position in developing and supporting foundational projects integral to the Ethereum network’s functionality. The plaintiffs have instigated their lawsuit on six distinct legal bases, with the extent of damages to be finalized as the trial unfolds.