The meteoric rise of Swiss involvement in the initial coin offering (ICO) boom has encountered further turbulence with a serious governance spat at the Tezos Foundationexternal link.
The public fall-out between the Tezos project’s founders, Arthur and Kathleen Breitman, and Johann Gevers, the president of the foundation created to spend the vast sums raised from the public in the summer, will make some already wary people even more nervous.
On Wednesday, the Breitmans published a damning attack on a perceived lack of activity by the Tezos Foundation, accusing its managers of falling behind schedule in implementing the building blocks for the cryptocurrency.
But more damagingly, the statementexternal link accuses Gevers of “an attempt at self-dealing, misrepresenting to the council the value of a bonus he attempted to grant himself.” Gevers has been suspended with the Breitmans baying for his permament removal from the foundation. In the statement, entitled “The Path Forward”, the Breitmans heavily hint at a more hands on role for themselves at the foundation.
Gevers has rejected the allegation, telling Reuters the attack is an “illegal coup” fuelled by “character assassination” and “outright lies”.
Whatever the outcome of the dispute, the Swiss crytptoasset community will be alarmed by more negative publicity. Last month, the Swiss financial regulator (Finma) closed down a crypto scam, whilst investigating 11 other cases, and soon after said it was probing the whole ICO business in Switzerland.
Organisations such as the Crypto Valley Associationexternal link have been working on a code of self-regulation for the ICO industry that has brought some $600 million into the coffers of Swiss-based foundations. “The rapid development of token launches has raised concerns around stability and security, and as a leader in this field, it’s our responsibility to support the industry,” statedexternal link president Oliver Bussmann.
The last thing the crypto community wants to see are the size 12 boots of regulators trampling all over the lawn. A potential legal and regulatory battle over the Tezos Foundation would hardly suit this purpose.
Finma and the Swiss Foundation Supervisory Authority in Bern are remaining tight-lipped about their intentions towards the Tezos Foundation. But the sums involved are hardly trifling. In July, shortly after the ICO that raised $230 million in a matter of days, the foundation said it held $220 millionexternal link worth of cryptocurrencies. According to Reuters, that figure has swelled to more than $400 million as the value of bitcoin and ether soared in the intervening months.
Peace of mind?
The Tezos ICO specifically did not guarantee any financial return, but nevertheless, should the project collapse or become impaired as a result of the row, there could be a lot of angry investors. Bloomberg has reported that the value of the Tezos tokens (Tezzies) has slumped dramatically in the last couple of days.
And then there is a credibility issue that has been raised on social media platforms dedicated to the crypto crowd. The whole point of creating a foundation to spend funds raised from ICOs is to create a legal barrier the cash and the project founders. This is to give investors peace of mind that their investment will be spent on creating the technology rather than lining the pockets of individuals.
The Breitmans insist that their proposed new roles will not damage the independence of the foundation, nor enrich themselves. The reaction from investors may not be quite so assured.
Tezosexternal link bills itself as the next generation of cryptocurrency, able to perform self-amending smart contracts on blockchainexternal link.