special report: backroom battle imperils $230 million cryptocurrency venture
ZUG, Switzerland/New York (Reuters)- Just three months ago, a technology project called Tezos raised $0. 232 billion online, in which new digital currencies were distributed to buyers. At that time, it was the most money ever raised from the public -- Popular areas of cryptocurrency. But Reuters has learned that the joint venture is now in danger of collapse due to a fight for control behind the scenes. The heated debate caused two young founders of tezos, Arthur and Catherine Britman, to have a dispute with John givers, who helped the chairman of the Swiss foundation established to handle the coin issue, the computer network of Tezos has been promoted and developed. The foundation should be independent according to Swiss law. It holds all the money raised, which has grown rapidly to more than $0. 4 billion, as donations are made in two cryptocurrency currencies, Bitcoin and Ethereum, which have greatly appreciated. But Breitmans, who still controls Tezos source code through a company in Delaware, is seeking to expel the head of the Foundation. A lawyer at Brett Mans sent a 46- Page letter to three other members of the Foundation on Sunday The People\'s Committee, calling on gevers to be promptly expelled and trying to give the couple a \"substantial role\" in a new structure that limits the responsibility of the Foundation \". The document accuses Gevers of \"selfdealing, self- Promotion and conflict of interests. According to Gevers, two board members later suggested by email that he set aside a month during their investigation. Gevers told Reuters he would not resign. Gevers said: \"as Arthur did to the rest of me before, it was an attempted character assassination. This is a long list of misleading statements and outright lies. He said two other board members were \"trying to launch an illegal coup \". Breitmans has been trying to control the foundation by bypassing the legal structure of the foundation, interfering with management and operations, as if it were their own private entity, Gevers said. He said that this has resulted in a costly delay in the development and launch of the Tezos network and new currencies. \"They unnecessarily put the project at risk,\" he said . \". In a written statement sent to Reuters, The Breitman reiterated their allegations against Gevers and said they \"acted in accordance with all applicable laws and regulations \". Their top priority, they say, is still to successfully launch the Tezos network. \"Hundreds of millions of dollars are at stake: Tezos digital coins, known as\" Tezzies \", have been priced at high premiums in futures trading, although they do not exist yet. The release of the Tezos network that will trigger the coin issue has been delayed. Contributors to fundraisers will not receive anything until the network is launched-no date is set. Under the terms of the Tezos coin issue, there is no guarantee that a Tez will be received by the participant. Participants agreed to accept the risk that the project \"may be waived. Gevers said he was committed to resolving the feud despite the feud so that \"the project was successful \". \"The story of how two young entrepreneurs raise money for a project is first detailed here. It highlights the inherent risk of the current ICOs frenzy in which tech startups issue new cryptocurrency to raise money. Reuters reported last month that cryptocurrency exchanges that buy, sell and store virtual currencies have become a magnet for fraud and deception. More than 980,000 Bitcoins-the most popular virtual currency-have been stolen since 2011. Today they are worth about $5. 5 billion. Similar amounts of money poured into the first-ever coin. ICOs generated $2 from January to September. 2 billion, according to data provider Novum Insights, this is more than three times the amount invested by traditional venture capital companies in similar start-ups. ICOs can be a way for technology projects to raise money online, for the development of new, open- The source is not necessarily for profitable computer networks. Contributors receive new digital coins or tokens and they usually need to \"pay\" to access the new network. But the recent wave of ICOs raising millions of dollars has attracted some questionable business claims and outright scams, as well as speculators who want to make a quick profit by trading coins. Authorities in the United States, Switzerland, China, Singapore and other countries have begun to pay close attention to the industry in order to seek possibly tougher regulation. \"Most ICOs are bought by people who want to\" flip \"their tokens to bigger fools for quick profit,\" Alistair Milne said. Founder of London At present, the Altana Digital money fund has avoided the ICOs. More than \"90% will drop to close- \"The value of time is zero,\" he predicted . \" The new cryptocurrency works through a technology called blockchain, which is essentially a public ledger maintained by a computer network. Blockchain applications are being tested by financial services companies, food suppliers, retailers and other businesses to create records Keep it simple and cheap. Tezos aims to be a more reliable blockchain than Bitcoin and Ethereum. Some entrepreneurs and investors in the blockchain industry say Tezos technology has the potential because it is easier to upgrade and possibly safer than other blockchain. ANARCHO- Let the son of capitalism French playwright and actor Claude drette studied applied mathematics, computer science and physics in France before moving to the United States and studying Financial Mathematics at New York University. He continued to work for the investment bank of Goldman Sachs and Morgan Stanley. He\'s still listed as a partner. The organizers of New York\'s anarchy and the \"Dear Leader\" The capitalist conference in New York described its philosophy as \"a radical libertarian that benefits the wealth of capitalist production, rapid technological development and a high level of life. The company\'s website added, \"We are also quite lazy in fighting the country . \" \"That\'s a password. In 2010, Breitman first met Catherine McCaffrey, an American college student from New Jersey. She was described as a liberal Republican on a political blog, and after listening to the provocative radio character rush Limburg at the age of five, she first talked about politics She married Breitman in 2013. Kathleen Breitman, 27, later worked at hedge fund Bridgewater Associates and blockchain company R3. In an article on the conservative website in July She said she was \"not getting along well\" with hedge funds, but \"having a good time\" at r3 \". Bridgewater did not respond to requests for comment. Arthur Breitman, 35, was an early fan of Bitcoin, which first appeared around 2009. But he began to believe that the blockchain behind bitcoin and other cryptocurrency was flawed and found it difficult to upgrade and unsafe. He tried to come up with a better way. In the summer of 2014, when Breitman worked in quantitative finance at Morgan Stanley, he published two papers online, introducing his concept of the new blockchain. He called it Tezos, a name his wife said he created, after creating an algorithm to search for the names of unclaimed websites pronounced in English. These papers were published under the pseudonym \"L. But the email and information from Arthur Breitman, commented by Reuters, clearly indicate that he is the author. In an email from Breitman to acquaintances in early 2015, he said he was seeking to create a business based on Tezos, but was trying not to be publicly associated with the project at that time. The News revealed that he expressed concern that his activities might conflict with his work at Morgan Stanley. Reuters reviewed a \"Tezos Business Plan\" in early 2015 that listed Breitman as chief executive. The plan predicts that if the company survives for 15 years, the value will be between $2 billion and $20 billion. The budget requires a salary of $212,180 by the third year. In August 2015, Breitman, who is still working at Morgan Stanley, set up a company in Delaware called Dynamic Ledger Solutions Inc. to develop Tezos. He listed himself as a Chief Executive Officer. The U. S. Regulatory body of the financial industry (FINRA) Requires registered securities professionals to provide written notice to the employer in advance in the event of \"reasonable expectation of compensation\" for external business activities. According to FINRA\'s records, Breitman has registered and has not reported any \"other business activities \". Morgan Stanley and Ferra declined to comment. \"We made all the right disclosures,\" Kathleen Breitman told Reuters on June . \". \"It\'s a hobby, you know. Just like there was never an intention to actually commercialize any software. She added: \"We and like C- Suite supervisor at the bank. . But honestly, it\'s not a big deal. In 2015, Arthur Breitman was promoting \"Tezos Inc. \"It is hoped to create a consortium of four to five banks to adopt the technology and fund the business. The business plan reviewed by Reuters requires $5 million to $10 million to be raised in two to three years. By that time, the blockchain began to draw interest from large financial institutions as it had the potential to help cut the tedious costs -- Office processes such as clearing and settlement of securities transactions. Tezos’ 37- Page business plan calls it \"the Internet for financial transactions\" and says the technology can be used to automate excessive transactionsthe- OTC derivatives trading market But Breitman failed to attract supporters. He told Reuters in June that he blamed his fund-raising failure on the decision to first develop the technology, rather than just selling \"dreams\" like other blockchain startups \". \"I think I am also a bad salesman,\" he said . \". \"I can say that,\" said his wife . \". In April 2016, Arthur left Morgan Stanley and by September, the bremans began to develop a new strategy for Tezos-to raise money online, to distribute digital tokens, and whose holders will maintain the Tezos blockchain. But the couple needed money to maintain the project. According to Tezos, over the next six months they received $612,000 from 10 early investors, including several cryptocurrency hedge funds. com website. The braemans chose a complex structure for the ICO. Earlier this year, they helped create a foundation based in Zug, Switzerland, known as \"Crypto Valley\" because it has many blockchain startups\"for- The email shows the profit status. According to the documents on the Tezos website, the idea is that the foundation will raise funds through ICO and then acquire bre, Breitman- A controlled company that has been developing Tezos. Breitmans believes that regulation can be provided through the work of the Swiss foundation, but not too much. Kathleen Breitman told Reuters in June that she and her husband chose to use a foundation based in Zug because Switzerland \"has enough regulators but doesn\'t like anything that\'s too crazy \"Guolog von Snoopy The author of a book on the governance of the Swiss Foundation, the establishment of a cryptocurrency enterprise such as Tezos not-for- Profit fund of Switzerland. \"The public interest is not clear to me,\" he said . \" He said that although it is not illegal, the purpose of creating a foundation is to make inventors profit from sales, which is related to it as a non-for- Profits should benefit the public. Federal regulators may eventually ban it, he said. \"The problem for some reason is -- \"The profit entity and the transfer that started out are valid at the moment, but will not last,\" he said . \". Kathleen Breitman told Reuters that the project began to run out of cash as work on the ICO originally planned to be held in May continued. She spoke to Tim Draper in the well. A well-known founding partner of Silicon Valley venture capital firm DFJ and a strong supporter of Bitcoin. He invested $1. 5 million through his company, Draper Associates, includes a minority stake in the company\'s DLS, which controls the source code of Tezos. The Breitman also hired some strange brewing strategies. S. To promote their project, Reuters wrote a news report on Draper\'s involvement in May 5. In promoting the story to Reuters, John O\'Brien, head of the odd beer company, claimed the progress of tezos. He wrote: \"The application of Tezos, from derivatives settlement to micro- Insurance is truly recognized by industry giants. EY, Deloitte, Lexin, etc. Tezos was adopted in their development environment and lab. ” On Oct. A spokeswoman for Ernst & Young certified public accountants told Reuters: \"the statement is incorrect. EY did not adopt Tezos. A spokesman for Deloitte said tezos\'s code is one of the many technologies that the blockchain \"we are considering,\" but it \"is still in its early stages and we haven\'t used this technology yet” Jean- Marc Eber, CEO of LexiFi, a French software company, said, \"at least it can be said that this sentence is inaccurate and unfortunately exaggerated. \"Although there has been\" informal contact, \"he said, at this stage LexiFi did not adopt tezos technology in its development environment or in its laboratories. The strange beer company refused to answer questions about the statement. The fund-raising event for Tezos began on July 1. There are a lot of Britman people. Broad expectations about how much they might raise. Documentation on Tezos. Com suggested that if they received more than $20 million, they might use it to \"negotiate with a small country -- Use Tezzies or buy mainstream print and television media to promote the technology. On June, Kathleen Breitman told Reuters that when the price of bitcoin was lower about a year ago, \"we would say, \'Hey, we \'d be lucky if we got 20 million. At the end of 13 days, the project received about 66,000 bitcoins and 361,000 Ethereum, which was worth about $0. 232 billion. This reserve is worth about twice as much now. Kathleen Breitman told Reuters that attending the Tezos fundraising campaign is like donating money for a public TV station and getting a \"tote bag\" in return. \"This is the same here,\" she said . \". The terms of the fundraiser refer to the donation as \"non- A refundable donation \"rather than a\" speculative investment \". \"If viewed as a donation, not a security, the funds raised may not fall within the remit of the US financial regulator. In the U. S. The Securities and Exchange Commission regulates investments in assets such as the company\'s shares and other securities. The SEC has been working on ICOs and issued an investor announcement on July warning: \"virtual coins or tokens offered or sold may be securities based on the facts and circumstances of each ICO. \"Part of the SEC assessment is to review the reasonable expectations of ICO participants. Some participants in the Tezos fundraising campaign told Reuters that they saw the coins as investments at least in part. Kevin Zhou, co- The founder of cryptocurrency trading fund Galois Capital said that he invested about five bitcoins in Tezos, which he believes is one of the better ICOs in general. \"It\'s an investment for me and a lot of people. \"We are looking for a return,\" Zhou said . \". \"I really don\'t care,\" he added, using Tezos technology. Draper told Reuters that cryptocurrency is a commodity like pork belly, and the acquisition of Tezzies is characterized by purchase rather than donation. When asked how much money he donated at Tezos fundraising this month, he replied via email, \"Are you saying how much money I bought? A lot. \"At the moment, the Tezos Foundation has all the fundraising revenue, while Breitmans controls most of Tezos\'s intellectual property rights through their Delaware company. According to a \"Transparency Memo\" on the Tezos website, the plan is for the Foundation to acquire breitmans and release the technology under a free software license. Gevers, who founded the Tezos Foundation, said it had a contract that stipulated that Breitmans would either sell Delaware companies to the foundation in \"a reasonable amount of time\" or, if they did not, \"The foundation is acceptable. He refused to provide a copy of the contract. It is unclear when the foundation will acquire the company. Kathleen Breitman told Reuters on June, \"Basically, you know, I think they\'re going to buy this company around July. \"If the deal is successful, the Breitman will get millions of dollars. According to the \"transparency memorandum\", the new blockchain \"must be successfully launched and operated\" for three months, and shareholders of DLS-Breitmans and Draper-are entitled to £ 8. 5% of the fund-raising activities were carried out in cash. According to Gevers, this amount is about $19. 7 million. Shareholders will also receive another 10% issue, and the coin issue will take place within four years. Currently, the coins are worth about $0. 14 billion in futures trading. Before the fundraiser, Catherine Britman was raving about the 52-year-old givers. A South African-based entrepreneur who has never run a foundation before. At a \"Ask Me Anything\" meeting on the online chat channel, she posted: \"He\'s amazing. General mensch and very philosophy are dedicated to our project. The relationship deteriorated later. Mr. gifvers said the Breitman was opposed to the people the Foundation proposed to hire. Another sticking point: the couple\'s company did not give up control of the Foundation\'s own website www. tezos. ch. \"They control the Foundation\'s domain name, website and email server, so the foundation has no control or secrecy in its own communications,\" said Gevers . \". The Breitman did not have a formal role in the Tezos Foundation. Their lawyer\'s letter this week proposed the establishment of two foundation subsidiaries, Tezos AG and Tezos France SA, to develop and support Tezos as CEO and CTO of Tezos AG. The couple will also receive \"observer status\" from the board of directors of the Foundation \". The Foundation will then \"restrict\" its oversight and support of the activities of its subsidiaries rather than any direct operations. According to Swiss law, \"the foundation is completely independent and the board of directors of the Foundation is completely independent . \" The foundation hopes the couple will continue to play a leading advisory role, Gevers said. \"They are all very capable people and it\'s clear they started all this. It is foolish to exclude them. But \"as long as I have anything to do with this, you can rest assured that the foundation will be independent,\" he added . \". \"As for the hundreds of millions of dollars of cryptocurrency raised in the ICO, Gevers said the foundation has slowly started selling virtual currencies-about $10 recently. It is worth £ 2 million per week and plans to invest the proceeds in different portfolios. The funds are designed to manage the foundation, ensure that Tezos works and help develop products using the technology. So where are all Bitcoin and Ethereum stored in ICO? This is confidential, says Gevers. He said: \"These are not held in any place, but through the high A secure \"digital wallet\" that cannot be controlled by either party \".