Davis Polk has secured a first-of-its kind class action settlement on behalf of its client, Tezos Stiftung (or the Tezos Foundation), in a case filed in federal court in California alleging that a cryptocurrency fundraiser constituted an alleged illegal offering of securities. The Tezos Foundation is a foundation organized under the laws of Switzerland that promotes the adoption and use of a blockchain technology called Tezos that facilitates verification of transactions through a cryptocurrency known as XTZ. In July 2017, the Foundation raised approximately $232 million to support the development of the Tezos platform. Multiple class action complaints were subsequently filed in state and federal courts nationwide alleging that the Fundraiser was an unregistered “initial coin offering” in violation of U.S. securities laws, and seeking the return of all contributions.
Davis Polk actively litigated the cases, successfully obtaining dismissal of a number of the actions against the Foundation.
On behalf of its client, Davis Polk thereafter engaged in mediation with the remaining plaintiffs before a retired federal judge. The parties reached a settlement that, if approved, will resolve all claims by contributors to the Fundraiser worldwide, all in a way that will enable the innovative Tezos network to continue to expand and thrive. This is the first settlement of its kind seeking to apply principles previously used in settlements of traditional securities litigation matters to the area of cryptocurrency. This settlement remains subject to approval in the U.S. District Court for the Northern District of California.
The Davis Polk team includes partners Neal A. Potischman and Edmund Polubinski III, counsel Andrew S. Gehring, associates Serge A. Voronov, Hannah B. Gerstenblatt, Garrett Cardillo and Abigail Q. Cooper (on leave). Members of the Davis Polk team are based in the New York and Northern California offices.