New coin project Tezos faces internal fights after successful ICO

Only three months ago tech project Tezos was able to raise $232 million online in what was a very successful initial coin offering (ICO) in which a new project is financed and a new currency is created.

Now the Tezos project is in grave danger of falling apart as two groups battle for control. On one side are the founders of Tezos, Arthur and Kathleen Breitman and on the other, Johann Gevers, who is president of the Swiss foundation that helped the two establish the offering and also to develop the Tezos computer network.

Under Swiss law, the foundation is supposed to be independent. The foundation holds all of the funds raised which now are valued at about $400 million. However, the Breitmans still have control of the source code for Tezos through a Delaware company. They are seeking to oust Gevers from being head of the foundation.

Breitman's attorney sent a letter to the two other board members of the foundation asking for Gever's removal and demanding the couple have a substantial role in carrying out the boards' responsibilities for Tezos. The letter accuses Gevers of "self-dealing, self-promotion and conflicts of interest". The two other board members have asked that Gevers step aside while they investigate.

However, Gevers told the press that he would not step down saying: “As Arthur has done to others before me. This is attempted character assassination. It’s a long laundry list of misleading statements and outright lies.” He also accused the other two board members of attempting an illegal coup. Gevers complained that the Breitmans were trying to control the foundation as if it were their private entity. They were bypassing the legal structure of the foundation and interfering with management and operations. The result has been delays in launching the Tezos network and the new currency that were putting the entire project at risk.

The Breitmans, however, claim to the press that they were acting in accord with all applicable laws and regulations and their priority remained the launch of the Tezos network. Yet the internal division has delayed the coins's release without any date being set for its future release. Until the network launches the fundraisers will receive nothing.

The value of tezzies (XTZ) has been falling lately in relation to its value compared to bitcoin as shown on the graph here. The graph will show you the comparison over the most recent hour, day, week or even a month and longer.Cryptocompare says of Tezos:Tezos is a new decentralized blockchain that governs itself by establishing a true digital commonwealth. It facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financially weighted smart contracts. Tezos takes a fundamentally different approach to governance by creating governance rules for stakeholders to approve of protocol upgrades that are then automatically deployed on the network. When a developer proposes a protocol upgrade, they can attach an invoice to be paid out to their address upon approval and inclusion of their upgrade. This approach provides a strong incentive for participation in the Tezos core development and further decentralizes the maintenance of the network.

The true digital commonwealth may never come to be and there is no guarantee that participants will ever receive a single Tez in return for their investments. Participants agree to and accept the risk that the project could be abandoned. However, foundation head Gevers said that he is committed to resolving the feud with the Breitmans so that the project can proceed.

The Tezos case exemplifies the risk of investing in cryptocurrencies. China and South Korea have already banned ICO's. While this temporarily resulted in a drop in the price of bitcoins and other cryptocurrencies, bitcoin bounced back and set a new record high last week. Even bitcoin, the most popular and valuable cryptocurrency, has suffered security issues. More than 980,000 bitcoins have been stolen since 2011 according to Reuters that today would be worth about $5 billion.

Nevertheless, from January to September ICO's brought in $2.2 billion an amount triple that invested in similar startups by traditional venture capital firms according to data collected by Novum Insights. Contributors to the ICO's receive coins or tokens that they typically need to access the new networks. Authorities in the US, Switzerland and a number of other nations are looking at ICO's carefully and no doubt more regulation will take place in the future in many countries.

Alistair Milne, of the London-based Altana Digital Currency Fund that has avoided ICOs said: “Most ICOs are bought by people looking to ‘flip’ their tokens to a greater fool for a quick profit.” He predicted that over 90 percent will plunge to a near-zero value over time. However, several investors and entrepreneurs claimed that the Tezos technology had great potential because it was easy to upgrade and also could be more secure than other blockchains.