The management of the company ConsenSys AG (CAG), working on the development of the Ethereum ecosystem, was accused of financial irregularities.
Former 35 CAG employees who own 50% of the shares have filed a request for an audit to investigate serious financial irregularities. A special review is conducted by law enforcement in accordance with the Swiss Code of Obligations and concerns transactions valued at billions of dollars in a deal code-named Project North Star.
Shareholders allege that CAG’s core intellectual property and subsidiaries were illegally transferred to a new entity, ConsenSys Software Incorporated (CSI), in exchange for 10% of CSI and $39 million in loan compensation. Founder Joseph Lubin provided a loan to his own company in August 2020. As a result, JPMorgan Chase has acquired a significant stake in two of the most popular Ethereum infrastructure tools, MetaMask and Infura.
A year after this event, CSI managed to raise $3 billion in funding. The new round is expected to raise $7 billion. Joseph Lubin is the largest shareholder in both companies, and the plaintiffs allege he personally benefited at the expense of CAG’s minority shareholders.
During the Project North Star transactions, Jeff Lubin and Frithjof Weinert were directors of both CAG and CSI. Under Swiss law, such double representation is considered null and void and subject to more scrutiny, which may lead to the cancellation of the transfer of assets.
Minority shareholders of CAG did not have information about the transfer of intellectual property due to the postponement of the annual meetings of shareholders, which is contrary to Swiss law. The validity of the board meeting is questioned, as is the legality of the board’s authorization of the transaction.
In response to attempts by minority shareholders to stand up for their rights, Lubin announced a sharp reduction in CAG staff from 1,200 people in 2017 to an expected 30 by the end of 2022. According to minority shareholders, the events led to the virtual liquidation of CAG without their consent.
ConsenSys is a New York-based blockchain technology company founded by Joseph Lubin. The company specializes in building Ethereum-based DeFi applications, with a suite of products including MetaMask, Infura, Quorum, Truffle, and others used by millions of users.
In February, the American analytical company Armanino reported that, according to its audit, BTC and ETH for $19 billion were placed on the Kraken exchange, including 2.0 ETH frozen in Ethereum staking for $3.5 billion.
