An ICO backed by Tim Draper, built to solve governance protocols and incentivize innovation; this was Tezo’s pitch when they launched their ICO in July of 2017. Fast-forward a year later, investors have still not received their Tezzie [XTZ] tokens, after $232 million was raised in funds.
Tezos promised to be a self-amending crypto ledger that was built to improve upon the Bitcoin and Ethereum blockchains. It was a governance system that enables the creation of new solutions on the blockchain. Innovation was rewarded using XTZ tokens.
The saga began when Tim Draper, Bitcoin billionaire extraordinaire invested $6 million in the company before the ICO sale. He held an 8.5% share in the company, along with founders Arthur and Kathleen Breitman. The company in question was Dynamic Ledger Solutions, which oversaw the Tezos’ ICO.
After the sale of tokens in the offering, the company was valued at close to $200 million. However, the ICO was uncapped, reducing the need for trading in secondary markets. 10% of all tokens invested in the ICO were reserved for the company.
The wunderkind ICO raised over 65000 in BTC and 361000 in ETH, making headlines for the amount of funds raised. This, coupled with the uncapped ICO, led many to believe that the venture capitalists and members of the board stood the most to gain.
The platform seemed to be shelved, however, as there were governance issues with the board and the founders. The network was not launched to the investors, and rumors of Tim Draper exiting after doubling his profits flew. Gevers, one of the members of the board was called self-dealing and self-promoting and alleged to have a conflict of interest by the Breitman couple. Gevers responded by saying that it was an “attempted character assassination”.
A few months later, Tezos Foundation was facing 4 class-action lawsuits as the product was not released to the public. Moreover, investors had not received the XTZ tokens that they purchased. Till date, the XTZ tokens have not been released to the public. The lawsuits in question charged the company with selling an unregistered security, misrepresentation of use of the collected funds, misrepresentation of when the network would be launched, and claims of false advertising, and deceptive trade practices.
In February this year, Kathleen Breitman threatened to “go rogue” and release the code and project for the people to use. These claims were not backed up, but the foundation released a roadmap for the future of the coin in April. The press release also stated that a new and more “competent” board had been appointed.
Yesterday, the Tezos foundation emerged from its hibernation to announce that investors would have to follow KYC and AML guidelines to get a refund or to move forward with the network.
Upon the completion of KYC, investors will receive codes for the activation of their public key hashes. These will come into effect during the launch of the betanet. They also said:
“The [Tezos] Foundation takes the right to personal privacy seriously, and the implementation of KYC/AML checks is the product of careful deliberation.”
The community erupted with rage over the announcement, as the Tezos subreddit and Twitter page were overrun with contributors claiming that it was a scam. Ethereum’s co-founder, Vitalik Buterin pitched in on the heated debate, and commented on the Twitter post, saying:
“This seems backwards. Why can’t third parties just run a script to scan the BTC/ETH blockchains, see how much everyone contributed, calculate how much XTZ everyone should get, and generate the genesis block without Tezos Co involvement? That’s how the Ethereum launch worked.”
He also said:
“In fact, you can do even better. A script to calculate the genesis block is released *at time of sale*, and it’s agreed that an ethereum block hash with a height that’s a multiple of 500000 is needed as a nonce. The developer just writes software, community launches when ready.”
The Tezos community is in shambles and collective rage, as evidenced by some of the comments on the announcement.
Captain HODL said:
“Retroactive KYC is shameful @tez0s is literally the worst ICO of all time i wouldn’t even call it an ICO at this point just grand theft”
User Currency Token said:
“No problem! Tezos is an “self-amending ledger” – so possibly that could be the first amendment the community can make – get rid of the KYC/AML check. Right?”