Tezos is trying to reach a settlement in a class-action lawsuit that has been dragging since 2017. While the firm denies any wrongdoings, the increasing legal cost was key in making this decision.
A settlement pending for approval
The Tezos Foundation announced that it has entered into a settlement agreement with the plaintiffs of an ongoing class-action lawsuit. The filing claims that the firm conducted an illegal initial coin offering (ICO) and that its tokens are unregistered securities under the U.S. Securities and Exchange Commission’s (SEC) framework.
The non-profit organization explained that it chose to settle all claims due to the rising legal costs, but maintains that the lawsuits are “meritless” while denying any wrongdoings.
The Tezos Foundation said:
“Lawsuits are expensive and time-consuming, and it was decided that the one-time financial cost of a settlement was preferable to the distractions and legal costs associated with continuing to fight in the courts.”
Court papers detail that the Swiss-based firm agreed to pay $25 million to settle the claims leaving unanswered the legality of the ICO it conducted and whether XTZ tokens qualify as securities. The proposed deal is still subject to the approval of U.S. District Judge Richard Seeborg of the Northern District of California.
The proposed deal reads:
“[A]t this preliminary approval stage, the court need only ‘determine whether the proposed settlement is within the range of possible approval. Federal Plaintiffs believe that the proposed $25,000,000 Settlement is an excellent result for the Settlement Class in light of all of the risks of continued litigation, and falls well within a range of what is considered fair, reasonable, and adequate.”
Tezos is one of many cryptocurrency companies that have been hit with class-action lawsuits for the sale of unregistered securities. Ripple, for instance, is dealing with a complaint that could “destroy the established XRP market” if the plaintiffs continue to move forward with it.
In a motion to dismiss the lawsuit, Ripple explained:
“Were Plaintiff allowed to belatedly challenge the classification of XRP, it would not only threaten to eliminate XRP’s utility as a currency, but it would upend and threaten to destroy the established XRP market more broadly […] potentially wiping out the value held by the alleged thousands of individual XRP holders around the world.”
Although the SEC is the regulatory body in charge of deciding whether a cryptocurrency is a security or not, it remains to be seen if the Tezos Foundation’s efforts to reach settlement allows them to continue operating without further legal issues.