Backroom battle imperils $230 million cryptocurrency venture

Finance


At the moment, the Tezos Foundation holds all of the fundraising proceeds, while the Breitmans, through their Delaware company, control much of Tezos’ intellectual property. The plan is for the foundation to acquire the Breitmans’ company and release the technology under a free software license, according a “Transparency Memo” on the Tezos website.

Gevers, who founded the Tezos Foundation, said it has a contract that stipulates the Breitmans will either sell the Delaware company to the foundation “within a reasonable point of time” or, if they don’t, “the foundation can take it.” He declined to provide a copy of the contract.

When the foundation will acquire the Breitmans’ company remains unclear.

Kathleen Breitman told Reuters in June, “Essentially, you know, they’re going to buy out the company in like July or so, I guess.”

The Breitmans stand to receive millions of dollars if the deal goes through.

According to the “Transparency Memo,” the new blockchain “must launch and operate successfully” for three months, then DLS’s shareholders — the Breitmans and Draper — are entitled to receive 8.5 percent of the fundraiser proceeds in cash. That amount, according to Gevers, is about $19.7 million. The shareholders also are slated to receive another 10 percent of the Tezzies issued, with the coin distribution spread out over four years. Those coins currently are worth about $140 million in futures trading.

Prior to the fundraiser, Kathleen Breitman effused about Gevers, 52, a Zug-based South African entrepreneur who has never before run a foundation.

During an “Ask Me Anything” session in May on an online chat channel, she posted: “He’s awesome. Total mensch and very philosophically committed to our project.”

Relations later soured. The Breitmans objected to people the foundation suggested it wanted to hire, Gevers said. Another sticking point: The couple’s company hasn’t relinquished control over the foundation’s own website, www.tezos.ch.

“They control the foundation’s domains, websites and email servers, so the foundation has no control or confidentiality in its own communications,” Gevers said.

The Breitmans officially have no role at the Tezos Foundation. The letter from their lawyer this week proposed the creation of two foundation subsidiaries — Tezos AG and Tezos France SA — to develop and support Tezos, with the Breitmans serving as chief executive and chief technology officer of Tezos AG.

The couple also would be given “observer status” on the foundation board. The foundation would then “limit” its activities to supervising and supporting the subsidiaries, “rather than conducting any direct operations.”

According to von Schnurbein, under Swiss law “the foundation is completely independent and the foundation board is completely independent.” Gevers said the foundation wants the couple to continue playing a leading advisory role. “They are both very competent people and obviously they started this whole thing. And it would be stupid to exclude them.”

But he added: “You can rest assured as long as I have anything to do with this, the foundation will be independent.”

As for the hundreds of millions of dollars’ worth of cryptocurrencies raised in the ICO, Gevers said the foundation has slowly begun selling the virtual currencies — lately about $10.2 million worth a week — and plans to invest the proceeds in a diverse portfolio. The funds are intended to be used to run the foundation, ensure Tezos works and help to develop products using the technology.

So where are all the bitcoins and ethers raised in the ICO stored? That, Gevers said, was confidential.

“These are not held in any one place,” he said, “but secured through high-security” digital wallets “that no single party has control over.”



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