Announcing The T2 Foundation
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Angry investors in a high-profile coin offering stalled by infighting are taking a page out of activists’ playbook—proposing a new board of directors—to get the project back on track.
The cryptocurrency deal, called Tezos, was designed last year using the technology behind bitcoin to develop software to automate complex transactions. But after raising $232 million, Tezos became embroiled in a power struggle between its creators and the chairman of a nonprofit foundation overseeing the project.
Initial coin offerings like Tezos’s have surged in popularity in the last 12 months among tech-minded investors who want to back early-stage companies involved with crytpocurrencies, such as bitcoin and open-ledger “blockchain” technologies that underpin them. They’ve also spawned a flurry of warnings from regulators across the world who say coin offerings are rife with fraud and bad governance.
Tezos has generated its own share of controversy, as well as lawsuits. Now, supporters of the project’s creators, Arthur and Kathleen Breitman, have formed a new nonprofit, called the T2 Foundation, to shake up the project and wrest control from the current foundation. The move is akin to shareholders in a corporation proposing a new board of directors because they like the chief executive more than the board.
Coin Flip
Value of Tezos coins
Source: Coinmarketcap.com
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“There has been a totally inadequate deployment of resources,” by the current foundation, said Olaf Carlson-Wee, the founder and CEO of the cryptocurrency investing fund Polychain Capital, which signed on to be one of the new foundation’s seven directors. Polychain invested an undisclosed amount in last summer’s Tezos offering.
Mr. Carlson-Wee, who will be the most high-profile member of T2’s board, said the Tezos Foundation has “drastically mismanaged” the capital raised last summer—which he estimated is now worth more than $1 billion given last year’s rally in cryptocurrencies. Investors in Tezos coins “needed to take action, to ensure there is a better governance model,” he said.
Whether the gambit will prove effective remains an open question. The Tezos Foundation, run by Switzerland-based entrepreneur Johann Gevers, still has control of the $232 million raised in the offering. The board of the foundation announced a new member Wednesday, after the departure of a director in December left it hobbled with only two members.
Rising Tide
Tezos, average daily trading volume
Source: Coinmarketcap.com
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Mr. Gevers, who didn’t respond to requests for comment, has complained that the Breitmans, a husband-and-wife team, have meddled in the foundation’s business of managing the coin offering’s money.
The problems date back to last summer, when a dispute arose over Mr. Gevers’s compensation for his role at the foundation. The Breitmans in September raised objections to a compensation contract Mr. Gevers created for himself. A lawyer representing the Breitman’s company wrote in an October letter that the contract was excessive and not properly disclosed.
The dispute has become so acrimonious that both sides made presentations at an industry conference earlier this year in St. Moritz, Switzerland, but they didn’t talk to each other.
The stalemate has delayed the software project. None of the developers have been paid by the foundation, said Ms. Breitman, who is CEO of Dynamic Ledger Solutions Inc., which owns the intellectual-property rights to Tezos. “A beta launch could be ready in the next five weeks,” she said, “if problems at the foundation could be resolved.”
Ryan Jespersen is a Utah resident and cryptocurrency enthusiast who spearheaded the T2 Foundation and said he has spent more than $50,000 of his own money to launch it. In an interview, he said he doesn’t want the second foundation to replace the first but was critical of the first foundation’s actions to date. “We would like to see the first foundation set up a board that has the best interests of Tezos in mind, not one individual,” he said, adding that he thinks Mr. Gevers should resign.
When Tezos’s initial coin offering launched in the summer, investors donated bitcoin and ether in exchange for “tezzies,” a new token that would be used on the Tezos platform. But the distribution, somewhat like a crowdfunded project, was tied to the network’s actual launch. Initially, that was expected at some point in 2017 but since has been delayed indefinitely, leading to several lawsuits against the Breitmans and the Tezos Foundation.
Mr. Gevers on Sunday published a post on the blogging platform Medium in which he outlined several steps the Tezos Foundation was undertaking to launch Tezos. However, several hours later he deleted the post, leaving the status of those moves unresolved.
On Wednesday, the foundation announced that it had named a Swiss accountant named Lars Haussmann as the third board member.
