After three years, a long-running class-action lawsuit against Tezos Foundation has come to a close. A U.S. District Judge Richard Seeborg from the Northern District of California approved a $25 million payment by Tezos Foundation to aggrieved investors.
The class-action lawsuit alleged that Tezos Foundation conducted an unregistered initial coin offering (ICO) in 2017.
According to the court documents filed last week, Tezos, as well as its founders Arthur and Kathleen Breitman, will part with $25 million to the aggrieved investors. The settlement was first put on the table in March earlier this year but was settled last week.
According to the settlement agreement, the attorneys will be paid about $8.5 million of the total sum. The investors who underwent a loss after taking part in the Tezos ICO will share the remaining $16.5 million. However, the investors who gained after participating in the ICO will not be included in the sharing of the funds.
Tezos Foundation, in March, resolved to settle the class action lawsuit since it was expensive as well as time-consuming. However, the firm maintained that the case lacked merit.
In 2017, Tezos conducted one of the most successful ICOs of the year, raising more than $232 million through the sale of its XTZ governance token. However, before the firm could celebrate the success, a California based law firm filed a class-action lawsuit alleging that Tezos sold unregistered security to US-based investors.
According to the Federal Securities Law, a company should not sell security tokens before registering with the Securities and Exchange Commission (SEC). These types of tokens must pass the Howey Test, and XTZ failed.
Following the filing of a class-action lawsuit, Tezos asked the court to dismiss the case as it lacked merit, but Judge Seeborg dismissed the lawsuit filed by Tezos attorneys.
Judge Seeborg’s order also states that the plaintiffs cannot make a future claim against Tezos as well as other defendants.
Although the class lawsuit has been settled, the issue of whether XTZ is a security or not remains unresolved.