Cryptocurrency provider Tezos and its Swiss foundation led by Monetas boss Johann Gevers are locked in a battle. At issue? A bonus payment out of $400 million in proceeds from the world's largest initial coin offering to date.
Two months ago, finews.com detailed how U.S.-based cryptocurrency provider Tezos used a Swiss foundation to fuel a payout of almost $20 million for its founders, Arthur and Kathleen Breitman. Tezos exemplified Switzerland's tightrope walk on business with bitcoin and other cryptocurrencies in Zug, a Swiss town south of Zurich which has grown into what is referred to as cryptovalley.
The basic premise? Tezos was to shift its intellectual property – the code for its Tezzie coin to operate on blockchain – from the U.S. to the foundation, overseen by Johann Gevers (pictured at left). The South-African is well-known in cryptovalley for trying to get his own digital currency, Monetas, off the ground.
Fast-forward to July, and Tezos hoovered up $232 million in cash and bitcoin proceeds to fund its future development. The fund-raising included provisions for the Breitmans to pocket almost $20 million if Tezos operated for at least three months on the blockchain – a ballsy but not illegal use of Swiss foundation law.
Unfounded Claims
Tezos engaged a U.S. public relations firm, Strange Brew, which allegedly made false claims to journalists that big U.S. firms are already working with the digital currency provider.
The foundation gave the appearance that the Breitmans wanted to cash out without getting their hands dirty in Switzerland. Neither Arthur or Kathleen took a foundation role. They left that to Gevers and two others: computer scientist and entrepreneur Diego Pons, and Guido Schmitz-Krummacher, a German lawyer and businessman who oversaw an $147 million token fundraising one month before Tezos'.
Now, the French-American couple who developed the Tezos technology are seeking to oust Gevers and assert more authority over the foundation, according to several media reports. For his part, Gevers claims the Breitmans are unwilling to let the foundation operate independently, as is laid out under Swiss law.
Unvetted Bonus
The couple claim the relationship soured when Gevers tried to help himself to a bonus out of the ICO proceeds of cash and bitcoin, and «misrepresented» to Pons and Schmitz-Krummenacher how much he planned to pay himself. The couple levied the accusation in a public blog post on «Medium», an online publisher.
Gevers didn't respond to requests from finews.com to comment on the accusation. The Tezzie doesn't yet trade but futures on the token do, and they were down by as much as 60 percent on Thursday following the revelations of infighting.
The fight lays bare how Switzerland has eagerly courted crypto business from the highest level of government, with little thought to what could go wrong. In Bern, overseers and regulators are still hashing out who is responsible for the newly-emerging business with digital tokens. But just like the traditional financial system, cryptocurrency is ripe for greed and abuse, as Singapore's financial overseer has pointed out.
Bonanza in Limbo
Tezos' assets from the ICO, which raised cash as well as bitcoin, are now worth more than $400 million as that digital currency's value has risen since July. But the project's development has come to a standstill as Gevers and the couple duke it out.
The Tezzie may not be launched until February or even later, the Breitmans said overnight. Neither the couple, Gevers nor Tezos' helping hands in Switzerland will come out of the dispute looking good. Tezos, which used Zug-based MME to set up in Switzerland, said it will now also set up an incorporated subsidiary under the foundation in order for the Breitmans to hold formal roles and to speed up its operations.
Switzerland's supervisor of foundations said it has begun regulating Tezos and is in touch with Finma, the Swiss financial regulator, over the foundation. The alpine nation usually pursues a hands-off approach in the nearly 13,000 foundations in Switzerland, generally only checking annual reports unless cases of gross negligence of malfeasance are brought to its attention.
Where is the Money?
A spokesman for Finma, which said last month it is «investigating a number of ICO cases,» didn't comment on Tezos specifically. Both are executive agencies, meaning they «just carry out orders» with little say in drafting law on regulating ICO foundations.
What about the $400 million from the ICO? Legally, it is under the control of the foundation, which has autonomy over how its funds are paid out, and thus in all likelihood under lock and key in a Swiss bank account.
Gevers, the foundation head, told «Reuters» that the bitcoin and ether raised in the ICO is secured in various digital wallets, but being converted into cash at a rate of $10 million weekly.
