Former ConsenSys employees sue founder Joseph Lubin – Here’s why
- They allege that Lubin breached a “no-dilution promise” made in 2015.
- A spokesperson from ConsenSys referred to the claims as “frivolous.”
In a fresh legal battle, more than two dozen ex-employees of Ethereum [ETH] infrastructure firm ConsenSys have filed a lawsuit against the company’s founder and CEO, Joseph Lubin. They allege that Lubin breached a “no-dilution promise” made in 2015. This is per the filing submitted to a New York Supreme Court on 19 October.
The former employees claim that Lubin, who is also a co-founder of Ethereum, enticed them to join ConsenSys in late 2014 by promising it would become the “future of cryptocurrency” and the “crypto Google.”
During this period, Lubin allegedly stated in a document that he would not dilute employee equity shares, a promise the plaintiffs assert he later broke.
In that document, it is quoted as saying, “It is my intention that the percentage ConsenSys members receive will not be diluted by additional issuance.”
Lawsuit over “No-dilution promise”
The former employees argue that Lubin not only failed to uphold this promise but also profited while they received nothing in return.
They further claim that the equity shares held in Swiss-based holding company ConsenSys AG, previously known as ConsenSys Mesh, became “worthless” after Lubin transferred assets like the cryptocurrency wallet MetaMask to a new US-based entity in 2020.
JPMorgan, named as one of the seven defendants, is accused of playing a pivotal role in negotiating the asset transfer and becoming a new equity holder in the US entity. The plaintiffs argue that Lubin, his inner circle, and JPMorgan kept the negotiation details secret, leaving the plaintiffs unaware.
They contend that Lubin didn’t bring many of his early employees, including themselves, over as equity holders in the new company. Instead, they continued to hold shares in a far less valuable entity stripped of its assets.
ConsenSys denies “frivolous” allegations
ConsenSys has responded to these allegations, with a spokesperson referring to the claims as “frivolous.” The company believes the former employees are attempting to find legal success in the US after failing to make headway in a Swiss court over the past two years.
The spokesperson states,
“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.”
The lawsuit against Lubin challenges that statement, as the Swiss High Court of Zug issued a judgment in favor of the plaintiffs. The court supported their position that Lubin breached his duties.
ConsenSys, founded in October 2014, has been involved in developing and hosting infrastructure projects that underpin a significant portion of the Ethereum network.
The plaintiffs have outlined six separate causes of action in their pursuit of damages, with the amount to be determined at trial.