Former employee claims that separating firm subsidiaries and products into a separate entity is a breach of fiduciary obligations.
- Thirty-five shareholders have requested that the transaction be investigated by Swiss courts.
- A spokesman for ConsenSys called the charges “factually false.”
ConsenSys, the Ethereum developer behind the MetaMask cryptocurrency wallet, is accused of illegally shifting important assets to a new firm by its founder. A group of 35 shareholders has petitioned a Swiss court to undertake an audit of the company and investigate Joseph Lubin’s business actions.
ConsenSys AG (CAG) — also known as ConsenSys Mesh — allegedly illegally transferred intellectual property and other assets into ConsenSys Software Inc. in August 2020, according to Arthur Falls, a former employee of the Ethereum software business (CSI).
Falls said in a statement Tuesday that the transfer was in exchange for a 10% stake in CSI and an offset of a $39 million loan from Lubin. From February 2016 through September 2017, Falls served as the director of media for ConsenSys Systems.
According to the statement, Lubin and Frithjof Weinert were directors at both CAG in Switzerland and CSI in the United States at the time. Due to the claimed dual representation, shareholders expect the asset transfer to be unlawful under Swiss and US law.
Falls said in an interview that the transfer was made “deliberately and premeditatedly” without obtaining shareholder opinion. Falls is one of 35 CAG shareholders who have requested a special audit to probe the deal through Swiss courts.
In an interview, a business representative said, “ConsenSys Mesh refutes the accusations behind the legal action, as well as those contained in the factually false news statement that was self-authored by one of the former employees.” “Mesh anticipates formally rebutting the claims and accusations in Swiss courts.”
According to records reviewed by media sources, the assets transferred from CAG to CSI were valued at $46.6 million as of June 30, 2020, and included products including Infura, MetaMask, Truffle, PegaSys, and Codefi, as well as subsidiaries in France, the UK, Ireland, Australia, and Hong Kong.
According to the records, Infura was worth $14.5 million at the time of the transfer, while Metamask was worth $4.4 million.
“Metamask is by far the most extensively used Ethereum wallet,” Falls said in an interview, “and it had been in development for five years at the time and in the marketplace for over four.” “It’s quite difficult to believe that it’s just worth $4.4 million.”
In April 2021, ConsenSys raised $65 million from JPMorgan Chase, Mastercard, and UBS. In November, the company secured another $200 million, increasing its total valuation to $3.2 billion.
ConsenSys said that MetaMask had around 21 million monthly active users at the time of the last fundraising. ConsenSys executives recently revealed in an interview that they plan to employ non-fungible tokens (NFTs) to onboard the next tens of millions of users into MetaMask.
“The employees who worked on building and selling the software took a salary cut to accomplish so in exchange for a piece of the pie,” Falls explained. “And now it’s no longer there.”
The transfer of assets from CAG to CSI was “conducted properly,” according to a ConsenSys spokeswoman, who added that accounting firm PwC conducted an independent appraisal.
“The business fundamentals and operating environment are completely different today than they were at the time of the transaction,” the representative said. “However, the group would like to apply a valuation that might be achieved today to a set of projects that were pre-monetization during Covid’s darkest days when the transaction took place.”
Over the following three months, the Swiss court will consider the audit request and decide whether it warrants further investigation. According to Falls, the shareholders’ organization is poised to sue.
Falls stated, “We want to reverse the purchase.” “We want the intellectual property taken away from CSI and returned to CAG,” said the group. That is our objective.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
