Crypto Started With Grand Dreams, Then Backroom Deals. Now It’s Mired in Lawsuits

“This is ultimately going to be a dispute about when the clock starts ticking,” says Chaikovsky. “The statute of limitations is there to ensure parties don’t wait until something succeeds to file suit. You file a suit when you have a problem, not when you have a valuable problem.”

For now, the case is stuck in a holding pattern. The defendants have moved to have 13 of the 15 claims filed by Dietz dismissed on the grounds that the California court lacks jurisdiction. A hearing on December 13 will determine whether the motion is valid, before the rest of the case can proceed.

But Dietz is not the only person suing Consensys at present. A second lawsuit in New York shares the same overarching theme: the right to ownership. In October, a group of 27 former Consensys employees filed a case alleging that Lubin and others had deliberately devalued their equity in the company by stripping its most valuable assets (including MetaMask) and transferring them to a new entity, Consensys Software Inc.

According to the suit, the plaintiffs joined Consensys in its early stages, between 2015 and 2016, before it began to generate significant revenue. They were convinced to gamble on an uncertain future at the startup, the complaint states, by promises of equity made by Lubin.

But the same unconventional corporate structure that confused Dietz was manipulated, the former employees claim, to cut them out of the picture. “We allege that Joe Lubin created different corporate forms in a way designed to maximize his own personal benefit and escape from what he owed our clients,” says Justin Nelson, partner at law firm Susman Godfrey and counsel to the plaintiffs. “The hub-and-spoke system was more than a metaphor. This was supposed to be a new way of thinking that would bring the world together. But when it came down to it, as we detail in the complaint, he stripped the assets.”

The same plaintiffs are pursuing separate legal action in Switzerland, where the original entity, Consensys AG, was registered, in a bid to have the transfer of MetaMask and other assets to Consensys Software Inc. reversed.

In an email statement, Elo Gimenez, global PR director for Consensys Software Inc., said the company is the target of “a series of baseless legal actions by a small group of disgruntled minority shareholders” of the separate entity. “Consensys Software will vigorously defend itself against this meritless lawsuit,” she said. In a separate statement, Diana Richter, head of marketing at Consensys AG, said the organization “refutes the allegations underlying the legal actions and looks forward to prevailing in Switzerland, the United States, and any other jurisdiction where these baseless accusations are made.”

Dietz has not given up on crypto, but he believes the idea that everything could be made better with a “pure technology approach” has been categorically disproven. “The model—technology without law and control—attracts a lot of bad actors,” he says.

There is no guarantee that either Dietz or the former Consensys staff will prevail in their respective lawsuits. But regardless of the outcome, the accusations leveled via the cases gesture to themes that have defined the latest chapter in crypto’s short history: chicanery and profiteering, concealed by a veneer of decentralization.

Across the industry, says Dietz, there is a habit of “selling one thing publicly and doing something else in private.” In his naivety, it wasn’t until too late, he says, that he realized “the truth could be so far from the rhetoric.”