The central theses
- Tezos has settled a class action lawsuit and will compensate investors who sold their XTZ and lost money on the investment
- The Tezos token sale did not constitute an unregistered offer of securities in relation to this lawsuit
- This has little impact on whether the SEC considers Tezos a security, even though it has not yet taken action against the Tezos Foundation
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The Tezos Foundation closed a class action lawsuit that began in 2017, settling $ 25 million with plaintiffs for their ICO, which raised $ 232 million.
Early investors can make a claim
Investors who bought tokens from Tezos during the first ICO can make a claim. Investors who sold tokens at a loss before November 25, 2019 are entitled to compensation; Users who have lost access to their passwords are also entitled to compensation. Investors who still hold their original XTZ and those who did not sell XTZ at a loss are not eligible.
Despite $ 25 million on offer, investors have quite a bit of work to do to get their payouts. Lawyer and Tezos blogger Alex Liu says users may need to collect a lot of information, including post addresses, emails, and self-calculated losses. In addition, those receiving compensation may have to pay tax on that amount. Investors “may get back a small nominal amount,” says Liu.
The result also means investors will not be able to initiate similar lawsuits regarding Tezos’ security status in the future.
Is Tezos an Unregistered Security?
The focus of this case was the question of whether the Tezos ICO was an unregistered security offering. The settlement did not reveal that Tezos was a security, and the Tezos Foundation will continue to deny that XTZ is a security. Ultimately, the fall just means that investors need to be compensated for their losses.
The Tezos community believes the lawsuit is largely unfounded. Liu argues that the lawsuit was “from unscrupulous / unsavory people who unnecessarily slowed the project down and caused irreparable damage.” He admits, however, that the judge on the case, the Hon. Richard Seeborg, called the settlement “fair, reasonable and reasonable”.
The case has little impact on whether the Securities and Exchange Commission considers XTZ a security. Statements made in 2018 suggest that the SEC is holding documents about Tezos even though the regulator has taken no direct action against the organization. Given that the SEC has filed lawsuits against high profile crypto projects like EOS and Sia, it’s plausible that it will take similar action against Tezos.
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