Tezos director resigns, sowing more uncertainty at crypto startup

LONDON/ZURICH (Reuters) - One of the three board members of the Swiss foundation that conducted the online fundraiser for the embattled Tezos cryptocurrency tech project has resigned, Reuters has learned.

Photo illustration shows detail of Tezos website, October 10, 2017. REUTERS/Dado Ruvic/Illustration

The departure on Monday of Guido Schmitz-Krummacher, a Swiss legal and management expert, is likely to add further turmoil to the project, which raised $232 million in cryptocurrencies in July.

The project has been embroiled in a battle over control between its founders, Arthur and Kathleen Breitman, and the president of the Zug-based Tezos Foundation, Johann Gevers. Reuters detailed the feud in October. Read the full investigation.

Schmitz-Krummacher resigned because he was frustrated by the infighting, which was consuming a lot of his time, according to information obtained by Reuters. He sits on several dozen Swiss boards.

Under the foundation’s bylaws, Gevers gets to nominate Schmitz-Krummacher’s replacement. If the third board member votes against the candidate, Gevers can cast an overriding vote.

The Breitmans declined to comment. Representatives for the board did not respond to requests for comment.

The Breitmans own the Tezos source code through a Delaware-based company they control, but the Tezos Foundation controls all of the fundraiser’s proceeds.

The standoff has delayed the Tezos project’s launch. Contributors to the fundraiser, known as an “initial coin offering,” have not received new digital coins, called Tezzies. Their contributions were made in bitcoins and ether, two other cryptocurrencies whose values have surged.

A group of Tezos supporters who launched an online petition seeking Gevers’ resignation or dismissal reiterated that demand on Tuesday. They called for the board to unanimously elect a replacement for Schmitz-Krummacher who is “completely independent,” with no ties to current or former board members. More than 1,200 people have signed the petition.

The Breitmans, their Delaware-based company and the foundation are facing three class-action lawsuits in the United States. Plaintiffs allege federal securities law violations and that the fundraiser defrauded participants, who were told they were making non-refundable donations to the foundation. The lawsuits are seeking refunds and damages.

Reuters reported on Dec. 1 that the Breitmans want the foundation to cover their legal costs. The foundation has not agreed to the request. Doing so would mean that contributors to the foundation would be indirectly footing the bill.

According to Swiss filings, the foundation’s regular auditor resigned in late November. An independent auditor is now examining allegations made by the Breitmans of wrongdoing by Gevers, which he denies. That auditor’s report has not been completed.

Reporting by Steve Stecklow in London and Brenna Hughes Neghaiwi in Zurich; editing by Lauren Tara LaCapra and Clive McKeef