ConsenSys shareholders accuse management of misconduct and seek an audit

Ethereum studio ConsenSys AG (CAG) conducted transactions with ‘serious irregularities’ worth billions of dollars in connection with the Project North Star deal. 35 former employees of the company filed a request for an audit.

The procedure was launched in accordance with the Swiss Code of Obligations.

According to the statement, in August 2020 the primary intellectual property of CAG and its subsidiaries was ‘illegally’ transferred to the new entity ConsenSys Software Incorporated (CSI) in exchange for 10% of CSI and repayment of a $39 million loan.

The deal was struck to the detriment of CAG’s minority shareholders and in the interests of founder Joseph Lubin, the majority shareholder in CAG and CSI. Lubin, as did Fritjof Wainert, served as a director in both companies. This could form the basis for declaring the transaction void under Swiss law.

The minority shareholders of CAG were not provided with information about the transfer of intellectual property due to the postponement of the annual general meetings. Requests for information about the deal were rejected over the course of the year.

Subsequently Lubin announced a sharp reduction in CAG’s workforce from 1,200 in 2017 to ‘de facto dissolution of the company without minority shareholders’ consent.

“We want to unwind the transaction. The intellectual property needs to be returned from CSI to CAG. This is our goal”, — said Arthur Falls, the group’s spokesperson, in an interview with Blockworks.

In Mesh (the current name of CAG) they rejected the accusations and said they were prepared to defend their rights in court. In their view, the business environment has significantly changed since the deal was announced.

The Swiss court will review the audit request within the next three months and decide whether it merits closer examination.

As part of Project North Star, JPMorgan Chase acquired a significant stake in the two most popular Ethereum infrastructure tools — MetaMask and Infura.

In November 2021, CSI raised financing of $200 million at a $3.2 billion valuation. Such a large amount of funding was based on CAG’s intellectual property, the claimants say.

Earlier, media reported that a new investment round was being prepared with a valuation of $6.5–$7 billion.

In early 2022, Visa announced a partnership with ConsenSys to develop a module intended to help central banks and financial institutions create user-friendly services on top of CBDC networks.

Earlier, MetaMask did not exclude the possibility of a non-custodial wallet issuing its own token, but urged users not to expect a generous airdrop.

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