The three-year-long class-action lawsuit against Tezos for supposedly violating securities laws in the US with its 2017 ICO has come to an end after Judge Richard G. Seeborg approved the $25 million settlement offer brought by Tezos earlier this year.
The company had little time to celebrate its successful initial coin offering (ICO) in 2017 when Tezos raised over $230 million as a Boston-based law firm called Block & Leviton filed a class-action lawsuit in the Northern District of California on behalf of investors.
The allegation read that Tezos violated California law by selling its tokens (XTZ) in an unregistered securities offering. By the end of the year, two more cases against Tezos emerged in Federal District courts in Florida and California.
In mid-2018, the three cases were consolidated into one before the Northern District Court of California. Shortly after, Judge Seeborg refused a motion to dismiss the lawsuit filed by Tezos.
Following the refusal, the Tezos Foundation filed for a settlement agreement in March 2020, explaining that the organization “believes it is in the best interest of the Tezos project and community as a whole.”
Nevertheless, the Tezos Foundation remained confident that the lawsuit was “meritless,” and further denied any wrongdoing. However, “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 courts.”
The court granted preliminary approval to the settlement offer in May this year. As such, the decision reached by Judge Seeberg comes somewhat expectedly.
The order indicated that the $25 million will be distributed among “all persons and entities” who participated in the 2017 ICO and sold their XTZ tokens before Nov 25, 2019, didn’t sell them before Nov 25, or were unable to access the coins for some reason. All eligible parties have until Oct 16, 2020, to file a claim to receive their respective share of the settlement.
According to Judge Seeborg, the final agreement is “fair, reasonable, and adequate.” His order also forbids the plaintiffs to make future claims against Tezos and the rest of the defendants.
The counsel will receive one-third of the settlement funds as attorneys’ fees and over $200,000 of litigation expenses that the defendants need to pay separately.