A group of former employees of ConsenSys has filed a lawsuit against the company’s founder and CEO, Joseph Lubin, accusing him of breaking a “no-dilution promise” that was made in 2015. The lawsuit was filed in the New York Supreme Court on October 19, stating that Lubin diluted the equity shares of the former staff members, going against his previous assurances.
The Promise and Alleged Betrayal
The plaintiffs argue that Lubin enticed them to join ConsenSys in late 2014 by presenting the company as the “future of cryptocurrency” and the “crypto Google.” As part of the recruitment process, Lubin allegedly committed in a document to not dilute the employees’ equity shares, stating, “It is my intention that the percentage ConsenSys members receive will not be diluted by additional issuance.”
However, the former employees claim that Lubin not only broke this promise but also benefited greatly from it, while they were left with nothing. They assert that their shares in Swiss-based holding company CosenSys AG (formerly ConsenSys Mesh) became worthless when Lubin transferred assets, including the popular cryptocurrency wallet MetaMask, to a new U.S.-based entity in 2020.
The Lawsuit and Defendants
The lawsuit names seven defendants, including JPMorgan, which the plaintiffs accuse of playing a crucial role in negotiating the asset transfer. They claim that Lubin, his inner circle, and JPMorgan kept the details of the negotiation hidden, leaving the plaintiffs unaware of what was happening.
Instead of including the former employees as equity holders in the new company, Lubin allegedly manipulated the situation, leaving them with shares in a significantly devalued entity stripped of its assets.
ConsenSys has responded to the claims by dismissing them as “frivolous.” A spokesperson for ConsenSys stated that the plaintiffs are attempting to pursue their grievances through the U.S. court system after failing to make progress in Swiss courts over the past two years. The spokesperson suggested that the plaintiffs are using litigation to seek financial gain by involving unrelated parties, such as ConsenSys Software.
Contrary to previous assertions that the legal challenge in Switzerland was unsuccessful, the High Court of Zug ruled in favor of the plaintiffs, acknowledging that Lubin had breached his duties.
ConsenSys, established in October 2014, plays a significant role in the development and hosting of infrastructure projects that support the Ethereum network. The former employees have filed legal action across six separate causes, seeking damages that will be determined during the trial process.
