Over two dozen former employees of Ethereum infrastructure firm ConsenSys have filed a fresh lawsuit against the firm’s founder and CEO, Joseph Lubin, over claims he diluted employee equity shares against earlier promises.
The former staff allege that Lubin — who is also a co-founder of Ethereum — breached this “no-dilution promise” made in 2015, according to the plaintiff’s Oct. 19 filing in a New York Supreme Court.
The plaintiffs allege Lubin lured in “smart and motivated” colleagues to work for ConsenSys in late 2014, claiming the firm would become the “future of cryptocurrency” and the “crypto Google.”
Around that time, Lubins allegedly stated in a document that he wouldn’t dilute employee equity shares; the plaintiffs allege he later broke that promise.
“It is my intention that the percentage ConsenSys members receive will not be diluted by additional issuance,” the document reportedly wrote.
The plaintiffs argued Lubin didn’t just break the promise but also “got rich” off it while they “got nothing.”
“He broke his word [and] he violated his legal commitments and duties. While Lubin got rich, Plaintiffs got nothing.”
The plaintiffs, who held shares in Swiss-based holding company ConsenSys AG — formerly ConsenSys Mesh — claim the shares were rendered “worthless” when Lubin transferred cryptocurrency wallet MetaMask and other assets to its new United States-based entity in 2020.
The plaintiffs also named investment bank JPMorgan — as one of the seven defendants — alleging it ”played a pivotal role” in negotiating the asset transfer and became a new equity holder in the new U.S. entity:
“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,” the plaintiffs added.
ConsenSys says plaintiffs claims are ‘meritless’
Speaking to Cointelegraph, a ConsenSys spokesperson called the claims “frivolous,” saying the plaintiffs are now trying their luck in the U.S. legal arena after “two years of getting nowhere with their frivolous claims” in a Swiss court.
“[The] plaintiffs now believe their meritless claims stand a better chance of yielding a pay day if they game U.S. courts and entangle ConsenSys Software and other unrelated parties in litigation.” The ConsenSys representative added:
“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.”
Despite claims that the plaintiff’s legal challenge went “nowhere” in Switzerland, the country’s High Court of Zug issued a judgment in favor of the plaintiffs.
The plaintiffs say the ruling supports their position that Lubin breached his duties.
ConsenSys was founded in October 2014, about nine months before the Ethereum blockchain launched in mid-2015.
The firm develops and hosts infrastructure projects that underpins much of the Ethereum network.
The plaintiffs are seeking damages across six separate causes of action, in an amount to be determined at trial.