Investors bring suit over sale of digital currency

The suit outlines a scheme by which Dynamic Ledger Solutions, owned by Kathleen and Arthur Breitman as well as Draper, allegedly took advantage of growing interest in digital cryptocurrencies to stoke enthusiasm for Tezos, a currency the company enabled by creating the blockchain technology behind it. A digital ledger that can record transactions, blockchain has enabled exchanges of bitcoin, and the lawsuit said the Breitmans attempted to expand the types of applications available on blockchain in the technology they developed for Tezos.

Though the price of digital currencies such as bitcoin have surpassed the predictions of many — stopping just shy of $20,000 in December — its value has proven to be highly volatile, plunging to under $7,000 in recent weeks and landing at a little more than $9,000 on Friday.

In an effort to promote use of the Tezos blockchain, a nonprofit called the Tezos Foundation was founded in Switzerland in April of 2017 and a contract allegedly outlining the sale of Dynamic Ledger Solutions to the foundation was signed by the company and the foundation in June, according to the suit.

At around the same time, Draper is believed to have invested $1.5 million in Tezos and publicly announced his investment in May, which the plaintiffs say caused interest in the currency’s impending initial coin offering, or ICO, in July to skyrocket, according to the suit.

Draper did not respond to requests for comment on this story.

For the some two weeks in July, the Tezos ICO was open, it allegedly raised 65,627 bitcoin and 361,122 of the digital cryptocurrency Ethereum, the combined total of which were valued at the time at an estimated $232 million. The digital currencies invested in the Tezos ICO were worth an estimated $1.2 billion as of Dec. 11, according to the suit.

Because those who participated in the ICO had a reasonable expectation that the Tezos token would appreciate in value and both Draper and Kathleen Breitman made public statements about the anticipated appreciation of the token, they were involved in the selling of securities that were never registered with the U.S. Securities and Exchange Commission, according to the suit.

The plaintiffs, which include Australian entity Trigon Trading Pty. Ltd. and California resident Bruce MacDonald, also take issue with the positioning of the exchanges made during the ICO as a non-refundable donation and not an investment. They allege that since the ICO, the Breitmans have engaged in public disagreements with the foundation’s president, Johann Gevers, and that the foundation has been liquidating assets collected during the ICO, at least $60,000 they say has been paid to Dynamic Ledger Solutions, according to the suit.

The class is requesting members are repaid their investments and any appreciation of them as well as compensation of legal fees, according to the suit.

anna@smdailyjournal.com

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