Is the dream of crypto riches turning into a legal nightmare? Joseph Lubin, the co-founder of Ethereum and founder of blockchain giant Consensys, is facing a fresh lawsuit in New York. This isn’t just another crypto squabble; it’s a serious accusation from over two dozen former Consensys employees who claim Lubin broke his promise on employee equity, leaving them empty-handed while he allegedly got rich.
The Broken Promise: What Did Lubin Allegedly Say?
Imagine joining a company with the promise of being part of something revolutionary, the “crypto Google,” as the lawsuit describes. That’s what former Consensys employees say Joseph Lubin pitched back in late 2014. These weren’t just any employees; they were described as “smart and motivated” individuals lured by the vision of Consensys becoming the future of cryptocurrency.
Crucially, the plaintiffs claim Lubin made a firm commitment in a document around 2015: employee equity shares would not be diluted. This promise, they allege, was a key factor in their decision to dedicate their skills and time to Consensys. The document reportedly stated:
“It is my intention that the percentage Consensys members receive will not be diluted by additional issuance.”
Fast forward to 2020, and the plaintiffs argue that this promise was shattered. They claim that when key assets like the popular cryptocurrency wallet MetaMask were transferred to a new US-based entity, their shares in the original Swiss-based holding company, Consensys AG, became virtually worthless.
“He Broke His Word”: The Core Allegations
The lawsuit paints a picture of betrayal. Former employees feel they were instrumental in building Consensys, only to be left behind when the company’s most valuable assets were moved. The plaintiffs’ frustration is palpable in their statement:
“He broke his word [and] he violated his legal commitments and duties. While Lubin got rich, Plaintiffs got nothing.”
Let’s break down the key accusations:
- Breach of Promise: Plaintiffs claim Lubin explicitly promised no dilution of their equity shares and then went back on his word.
- Asset Transfer: The transfer of MetaMask and other assets to a new US entity in 2020 allegedly stripped the original Swiss company of its value, rendering their shares worthless.
- Unjust Enrichment: Plaintiffs argue Lubin and others profited from this asset transfer while early employees were left with nothing.
- Lack of Transparency: The lawsuit alleges secrecy surrounding the asset transfer negotiations, excluding early employees from crucial information.
JPMorgan’s Role: More Than Just an Investor?
Interestingly, the lawsuit doesn’t just target Joseph Lubin and Consensys. Investment banking giant JPMorgan is also named as a defendant. The plaintiffs allege JPMorgan played a “pivotal role” in negotiating the asset transfer and subsequently became an equity holder in the new US entity.
This inclusion of JPMorgan raises questions. What exactly was their involvement? Did they facilitate a deal that allegedly disadvantaged early Consensys employees? The lawsuit suggests JPMorgan was not just a passive investor but an active participant in the events leading to the alleged equity dilution.
According to the filing:
“Lubin, his inner circle, and JPMorgan kept the details of the negotiations secret—Plaintiffs were left in the dark.
“Lubin did not bring over many of his early employees—the Plaintiffs here—as equity holders in the new company. Instead, they continued to hold shares in the far less valuable entity that had been stripped of its assets,”
Consensys Fires Back: “Meritless Claims”
Consensys is not taking these accusations lying down. A spokesperson for the company has dismissed the lawsuit as “frivolous” and a desperate attempt by disgruntled former employees to strike gold in the US legal system after allegedly failing in Swiss courts.
Consensys’s counter-arguments include:
- “Frivolous” Claims: Consensys argues the lawsuit lacks merit and is an opportunistic attempt to gain from the company’s success.
- Swiss Court Failure: They claim the plaintiffs have already unsuccessfully pursued similar claims in Switzerland for two years.
- Not Consensys Software Employees: Consensys points out that the plaintiffs were never employees of Consensys Software, the new US-based entity, implying a lack of direct connection.
The Consensys representative stated:
“[The] plaintiffs now believe their meritless claims stand a better chance of yielding a payday if they game U.S. courts and entangle Consensys Software and other unrelated parties in litigation.”
“We fully expect that the plaintiffs, who were never employees of Consensys Software, will soon find this gambit is another fruitless attempt to enrich themselves from the success of others.”
Swiss Ruling: A Twist in the Tale?
Despite Consensys’s claim of failed Swiss legal challenges, the plaintiffs assert a victory in Switzerland. They state that the High Court of Zug issued a judgment in their favor, supporting their position that Lubin breached his duties.
This Swiss ruling, if true, adds a layer of complexity to the case. It suggests that a court has already found some merit in the plaintiffs’ arguments, contradicting Consensys’s portrayal of entirely “meritless claims.”
What’s Next? The Legal Battleground Shifts to the US
Founded in 2014, just before the launch of Ethereum, Consensys has become a cornerstone of the Ethereum ecosystem. This lawsuit casts a shadow over its success story, raising questions about fairness and promises made to early contributors.
The former employees are seeking unspecified damages across six causes of action. The amount will be determined at trial, meaning this legal battle could be lengthy and costly for all parties involved.
Key Takeaways: What Does This Mean for Crypto and Employee Equity?
This lawsuit is more than just a company dispute. It touches on crucial themes within the crypto world and the broader startup ecosystem:
- Employee Equity Promises: How binding are verbal or early-stage equity promises in the fast-moving crypto space? This case could set precedents.
- Transparency and Fairness: As crypto companies mature, the need for transparency and fair treatment of early employees becomes paramount.
- Legal Scrutiny of Crypto Deals: This lawsuit highlights the increasing legal scrutiny of crypto deals and business practices.
- David vs. Goliath Narrative: The case pits former employees against a well-funded company and a Wall Street giant, resonating with the David vs. Goliath narrative often seen in legal battles.
The Consensys lawsuit is a developing story that the crypto world will be watching closely. Will the former employees succeed in their claims, or will Consensys successfully defend against what they deem “meritless” accusations? The outcome could have significant implications for employee equity in the crypto industry and beyond. Stay tuned as this legal drama unfolds.
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