Tezos Decided to Stop Fighting Lawsuits, Will Reach Settlements
Despite its ongoing attempts to resist class action lawsuits, the Tezos Foundation has decided to settle with claimants due to rising legal costs.
- Tezos has faced several class action lawsuits since 2017, which will now be settled.
- The decision is due to rising legal costs, and Tezos maintains that its ICO did nothing wrong.
- This outcome will not have a direct outcome on whether XTZ is considered a security.
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The Tezos Foundation has announced that it will reach settlements for ongoing class action lawsuits. Those cases concern whether the Tezos cryptocurrency (XTZ) is a security, whether it conducted its ICO improperly, and whether it misled investors at that time.
Legal Costs on the Rise
Legal costs are central to Tezos’ decision to reach a settlement.
The Tezos Foundation maintains that the lawsuits are “meritless” and adds that it “continues to deny any wrongdoing.” However, it admits that the lawsuits were a burden:
“Lawsuits are expensive and time-consuming, and it was decided that the one-time financial cost of a settlement was preferable to the distractions and legal costs associated with continuing to fight in the courts.”
As with many class action lawsuits, it seems that some of the lawsuits filed against Tezos are “copycat” lawsuits that make nearly identical claims. Investors filed at least four lawsuits against Tezos in 2017 alone, and at least one lawsuit was still underway in federal court late last year.
Despite the fact that Tezos has been overwhelmed with legal cases, some rulings have come out in Tezos’ favor in the past. Courts in California dismissed two cases against Tezos last year. Presumably those dismissals will discourage future lawsuits.
Details Are Still Uncertain
Because the Tezos Foundation has not yet settled in court, some details are not yet known.
Though there are many class action lawsuits, it is not clear how many individuals will actually file a claim when it comes time to do so. The Tezos Foundation explained to us in an email:
“Settlement funds will be distributed to those in the settlement class who file valid claim forms. The settlement class would consist of those who participated in the 2017 fundraiser, but would exclude the defendants and certain of their affiliates.”
Likewise, the Tezos Foundation does not yet know how much the settlement will cost. “The plan of distribution has yet to be determined,” the organization told Crypto Briefing.
Other Class Action Suits
Tezos is not the only crypto company that has been confronted by a class action lawsuit.
Ripple is facing a similar lawsuit centered around its status as a security. Elastos, a minor altcoin, is facing a comparable lawsuit. Bitfinex, meanwhile, is fighting a lawsuit concerning market manipulation.
These lawsuits should not be confused with lawsuits filed by the U.S. SEC, which has the authority to decide whether or not a cryptocurrency is a security. The SEC has settled with several projects in this way, including EOS, Sia, and Engima—all which were given permission to operate after paying a fine.
At most, class action suits may affect whether a cryptocurrency is perceived as a security. That may indirectly influence whether exchanges and institutional investors consider it risky to deal with that coin.
Given that Tezos is a top-10 cryptocurrency, a settlement is unlikely to harm its reputation in that way.