A total of 27 former ConsenSys employees have filed a lawsuit against the company’s founder, Joseph Lubin. They alleged that when joining the company at an early stage, Lubin promised them shares (equity), but when the company’s main assets were transferred to JP Morgan, Lubin did not include them as shareholders.
According to the lawsuit filed in New York Supreme Court on October 19, Lubin made a promise to employees to receive “hub equity,” which refers to shares in the central ConsenSys entity that will own various products and subsidiaries.
This equity is provided as a replacement for substandard salary compensation when employees join the company at an early stage. Lubin emphatically stated that employees would be “shared stakeholders” and share in the potential profits from ConsenSys’ growth.
However, in August 2020, ConsenSys underwent a restructuring in which core assets such as MetaMask, Infura, and Codefi were transferred to a new entity in Delaware named ConsenSys Software Inc. (CSI). This resulted in the assets of the original entity, namely ConsenSys AG based in Switzerland, becoming less valuable.
Lubin then held a 52.5% stake in CSI, while most of the early employees were not given shares as the initial contract regarding “hub equity” had promised.
In the document, it is also explained that Lubin’s wealth grew rapidly between 2017 and 2019, while employee equity still cannot be cashed out, only existing on paper.
“As a result of Lubin’s breach of covenants and covenants of good faith and fair dealing, plaintiffs have lost their hope of sharing in ConsenSys’ success in exchange for increased risk, lower pay, and basic effort as early employees,” he wrote in the submission.
In their lawsuit, the former employees stated that the transfer of assets was carried out without notifying them, without providing a shareholder vote, and without giving employees an opportunity to participate. They alleged that the asset valuation was manipulated for Lubin’s personal interests.
In addition, they also alleged that Lubin provided misleading information to employees regarding the company’s position, rights and plans. These former employees are seeking compensation for the profits they lost in the course of ConsenSys’ growth. They feel that the promise of potential returns for the risks they took and their initial contributions has been squandered.
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