The Tezos Foundation, the Ethereum-like smart contract platform that is most famous for internal squabbling over money and being sued by multiple law firms, has hired PricewaterhouseCoopers to execute an audit. In the press release it explains why it has hired one of the biggest accounting firms in the world: “We believe that accountability and trust will be central pillars of any successful entity operating in the blockchain space.”
Arguments and lawsuits
Tezos was created by Kathleen and Arthur Breitman, and ownership of the Tezos intellectual property belongs to their company, Dynamic Ledger Solutions of Boston.
Tezos raised $232 million in its ICO in July 2017. The Breitmans set up a non-profit organisation in Switzerland, the Tezos Foundation, which was to handle the money. The foundation was lead by a man called Johann Gevers.
Trouble started when the Breitmans attempted to move the intellectual property rights from Dynamic Ledger Solutions to the Tezos Foundation, which would have netted them a tidy profit. At the same time, they accused Gevers of organising himself a bonus of $1.5 million.
Then came the lawsuits. All three were filed in quick succession in the month of November 2017. The first was filed by Taylor-Copeland Law of San Diego, the second lawsuit by Silver Miller of Florida, and the third by
Restis Law Firm, also of San Diego.
All three of the lawsuits accused Tezos of false advertising and securities fraud – Tezos tokens were sold as securities but not registered as such.
In December 2017 the Breitmans tried to get some emergency funding from the board of the Tezos Foundation to pay for all the lawsuits. Their argument with Gevers complicated matters.
In the end, Gevers resigned in February 2018. The official press release said: “To serve the best interests of the Tezos Project, Johann Gevers and Diego Olivier Fernandez Pons [another board member] have voluntarily offered to resign from the Foundation Board.”
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The Tezos Network was finally launched in beta mode in June 2018. The Breitmans managed to immediately anger their investors again by giving them a new demand – that they can only redeem their tokens if they provide their personal details to a company called TokenSoft.
Sharing your identity has become an integral part of the cryptocurrency system over the past year or so as a response to crime. However, this requirement was not mentioned when Tezos was launched.
This seems backwards. Why can’t third parties just run a script to scan the BTC/ETH blockchains, see how much everyone contributed, calculate how much XTZ everyone should get, and generate the genesis block without Tezos Co involvement?
That’s how the Ethereum launch worked.
— Vitalik “Not giving away ETH” Buterin (@VitalikButerin) June 11, 2018
PwC and the blockchain
PwC is an accounting company with approximately 200,000 employees – it is considered one of the ‘big four’ firms in the US.
The company first became officially invested in cryptocurrency in May 2018 when its Hong Kong and Singapore branches acquired a small ownership interest in a Chinese blockchain-based supply chain startup called VeChain. Most recently it published a study of the ICO market in collaboration with a Swiss government-supported economic zone called Crypto Valley.
Tezos is clearly trying to assuage doubts. The press release says: “The Foundation is committed to operating with the highest degree of integrity in the service of our mission to support the Tezos protocol, ecosystem, and community. Engaging a top-tier independent external auditor ensures that the Tezos community and its observers can trust our operations and use of finances.”