Blockchain company ConsenSys Faces Multi-Billion Dollar Audit as Shareholders Claim Board Breaches Fiduciary Duties - Attributed to Arthur Falls
Mar 01, 2022, 18:56 ET
SAN FRANCISCO, March 1, 2022 /PRNewswire/ -- On Tuesday the 1st of March 2022, a group of thirty-five former employees representing more than 50% of all known ConsenSys AG (CAG) shareholders filed a request for a special audit pursuant to art. 697a et seq. of the Swiss Code of Obligations. The special audit is to investigate serious irregularities at CAG.
On August 14, 2020, fundamental intellectual property and subsidiaries were illegally transferred from CAG into a new entity, ConsenSys Software Incorporated (CSI), in exchange for 10% ownership of CSI and an offset of a $39 million loan by founder Joseph Lubin. Internally code named "Project North Star", the transaction resulted in legacy financial institutions such as JPMorgan Chase acquiring an influential stake in MetaMask and Infura, two of the most widely used infrastructure tools in Ethereum. One year later, this intellectual property was used to raise funding for CSI at a valuation of $3 Billion, with rumors of a $7 Billion valuation for the current round.
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.
During Project North Star, Joseph Lubin & Frithjof Weinert acted as directors at both CAG & CSI. For such a transaction, dual representation is in general invalid under Swiss law and considered to warrant special scrutiny in the USA. Due to this dual representation, the transfer of assets from CAG to CSI is expected to be void under Swiss law and likely also under US law.
Because annual shareholder meetings, required by Swiss law, were illegally delayed after the shareholder meeting for 2018 (the meeting for 2019 took place in late 2021, the meeting for 2020 has yet to take place), CAG minority shareholders had no idea this illegal transfer of IP had taken place. Because of the illegal delay of shareholder meetings, Frithjof Weinert's re-election to the board of directors, due at the 2019 shareholder meeting, never took place. As such, Weinert faces the accusation of not being a validly elected director, and his authorisation of the Project North Star transaction to be legally invalid.
Shareholder requests for information relating to the Project North Star transaction were denied for more than a year until the directors learned of legal efforts to enforce minority shareholder rights. In response, the directors held an "Informal Informational Event" in November 2021, where Joseph Lubin stated that staffing at CAG was being reduced from 160 at the end of 2020, to 90 by the end of 2021, and 30 by the end of 2022. This is a reduction of almost 98% from the company's peak of over 1,200 in 2017, leaving it only a small single-digit percentage of its former size.
The minority shareholders state that the transfer of assets from CAG to CSI resulted in a de-facto liquidation of CAG, without the required consent of a shareholder meeting. The minority shareholders also state that in their actions related to Project North Star, the directors of CAG were in breach of their duty to act in the interests of CAG.
The involved 50% of CAG shareholders publicly request that anyone who holds CAG shares, and anyone who was promised shares, please reach out to [email protected]. We will help all those who have been harmed. We will fight for the IP and subsidiaries to be returned to CAG and 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.
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SOURCE Arthur Falls
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