Former ConsenSys employees file for audit claiming ‘serious irregularities’
A group claiming to represent 35 former ConsenSys AG (CAG) employees has requested an audit under the Swiss Code of Obligations to investigate “serious irregularities” they allege that occurred in mid-2020.
CAG, also known as Mesh, is the company behind top Ethereum-based wallet provider MetaMask and was founded by Joseph Lubin, who is also the co-founder of Ethereum.
According to a press release, the group of employees who claim to represent around 50% of all known shareholders submitted the request to a Swiss Court on March 1.
The group alleged that “fundamental intellectual property and subsidiaries were illegally transferred” from ConsenSys AG (which it refers to as CAG) into a new entity called “ConsenSys Software Incorporated” (CSI) on August 14, 2020.
The former employees also assert that they and other minority shareholders had no idea that the IP transfer had taken place and claim that the deal was only conducted to benefit major shareholders and Lubin:
“Joseph Lubin is the majority shareholder of both companies. The transaction was to the detriment of the minority shareholders of CAG and to the benefit of Joseph Lubin personally.”
The Washington-based company hit back in a statement suggesting that the release was the work of one employee.
“Mesh refutes the allegations underlying the legal action as well as those contained in the factually inaccurate press release that was self-authored by one of the former employees. Mesh looks forward to formally refuting the allegations and accusations in Swiss courts.”
According to the claims, the deal saw IP and subsidiaries transferred to “ConsenSys Software Incorporated (CSI), in exchange for 10% ownership of CSI and an offset of a $39 million loan by founder Joseph Lubin.”
The deal was said to have resulted in top traditional financial institutions such as JP Morgan Chase acquiring stakes in MetaMask and Ethereum developer platform Ifura. This was while the intellectual property was used as a key drawcard to raise funding for CSI at a $3 billion valuation in 2021.
ConsenSys said the property transfer was valued fairly at the time and that the landscape had changed dramatically since mid-2020, which is why the assets increased in value so much.
The group of employees is seeking for the “IP and subsidiaries to be returned to CAG” and is willing to battle out the matter in court to find a resolution:
“We will push to seek justice through the Swiss court system. We are not interested in settling for less and we are ready for the upcoming court battles.”
Related: New ConsenSys Mesh NFT marketplace pays royalties to creators and collectors
The latest action against ConsenSys and Lubin comes just a few months after former general partner (GP) Kavita Gupta filed a lawsuit against the firm in New York alleging that it had failed to pay out the agreed carry percentage related to a fund she managed between 2017 and 2019.
The dispute has since become embroiled in claim and counterclaim, with Consensys hitting back by filing a complaint in mid-January. This alleged that Gupta had “fraudulently induced ConsenSys to hire her” via fake university degrees and work credentials.
Gupta Gupta then filed an additional complaint alleging that ConsenSys had engaged in “fraud, negligent misrepresentation and unjust enrichment,” relating to the accusations against her.
Posting the court documents via Twitter on Feb. 3, Compass Mining content director and cryptocurrency journalist Will Foxley likened the back and forth to a “National Enquirer piece.”
The curious part is the time discrepancy between the “resume fraud” being discovered, and her leaving the firm. The court will have to weed its way through two different time lines.
— Will Foxley (@wsfoxley) February 2, 2022