A bitter legal battle has erupted with 27 early employees of ConsenSys AG accusing founder Joseph Lubin of robbing them of potentially billions in equity when he relocated the company to the US.
Keypoints
27 early employees of ConsenSys AG in Switzerland filed a lawsuit against founder Joseph Lubin in New York.
They allege Lubin deprived them of equity after transferring core assets from the Swiss entity to a new US-based ConsenSys Software Inc.
Lubin allegedly moved assets like MetaMask to the US firm in 2020 without bringing over the employees as shareholders.
The employees claim Lubin broke commitments that they would get equity in ConsenSys for taking early risk with lower salaries.
Lubin emerged with 52.5% of the new US firm while most early employees got no equity, according to filing.
Lubin has not yet responded to the lawsuit brought by the Swiss company’s early employees.
The legal battle follows the employees first trying claims in Swiss court but now shifting fight to US.
Filed in New York court, the lawsuit alleges Lubin misled employees about their rights and equity stakes. He allegedly promised “hub equity” in the Swiss entity to compensate for low salaries and early risk-taking.
However, in 2020 ConsenSys underwent a restructuring. Core assets like MetaMask were transferred to a new US-based firm ConsenSys Software Inc., which Lubin emerged owning 52.5% of. Employees claim this stripped them of promised equity upside as shareholders in the original entity.
The crux of the issue is the equity agreements were with the Swiss firm while Lubin transferred assets to a separate US company. Employees say this breach of contract denied them the dramatic growth they were owed stakes in.
With ConsenSys now valued at over $7 billion, the equity in question amounts to billions left on the table as employees were offered no share in the new US entity. Lubin allegedly executed the move in his own interests without notice, vote, or participation offered to employees.
After failed attempts to litigate in Swiss court, the battle has shifted to US courts with New York the new battlefield. The jury trial demand and NY venue indicates employees feel US courts offer better odds to remedy lost equity, although ConsenSys dismissed the claims as meritless.
The complex saga of international jurisdiction and shell company restructurings boils down to early stakeholders alleging being deprived of their rightful share. As crypto firms globalize, the case highlights the murky cross-border frictions around equity rights. The outcome stands to set an important precedent on protecting employee ownership in growing startups.
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