An investor and three founders are being sued in a landmark cryptocurrency case centered on the ethereum decentralized application Augur.
Three years ago, Augur, a prediction market system that runs on the ethereum blockchain, held one of the first initial coin offerings (ICOs), long before the funding mechanism gained mainstream momentum.
Between August 7 and September 5, 2015, the project issued 8.8 million reputation (REP) tokens from a maximum circulating supply of 11 million tokens, each priced below $0.60, to raise over $5 million for the project.
Supported by only a handful of team members, Augur devised a decentralized protocol where outcomes of events could be forecasted in a trustless, peer-to-peer manner and rewarded for accuracy with the financial incentive of a native cryptocurrency: in other words, betting, but without the worry of platform providers or government bureaucrats taking control.
Three years after the ICO, reputation tokens have traded as high as $100 per REP, meaning ICO participants have potentially profited up to 200 times on their principal investments. Meanwhile, Augur has matured into a staff of 15 developers, designers and researchers, collaborating with the award-winning IDEO design group to roll out its beta product interface. Ethereum co-founder Vitalik Buterin and Lightning Labs co-founder Elizabeth Stark have also joined on as advisors. Augur’s main network is now expected to launch in July 2018 in what industry veterans have hailed as one of the more compelling use cases for blockchain.
Practically invisible in the midst of the public attention has been a watchful early project member — an absence he claims has been orchestrated as part of a larger conspiracy.
In a civil lawsuit, Matthew Liston, 26, has taken four Augur associates to court, alleging that angel investor Joseph Ball “Joe” Costello, 64, and three other founding members, Jack “John” Peterson, 35, Joseph Charles “Joey” Krug, 22, and Jeremy Gardner, 26, committed fraud, breach of contract, and trade theft in connection with conflicts that arose out of Liston’s termination from the company and his stake in Augur’s token distribution, leaving him empty-handed.
The lawsuit also includes accusations that after his dismissal Liston was coerced into signing a settlement agreement containing terms Peterson appears to have recently broken. Specifically, Liston says that the Augur team reneged on a promise to acknowledge him as a co-founder, preventing him from earning the same professional recognition among industry peers.
The lawsuit states: “Ironically, Matthew Liston has suffered damage to his reputation.“
In addition to the executive team, the San Francisco Bay Area company’s initial corporate entity, Dyffy, Inc., has been named as a defendant for allegedly failing to pay Liston back wages owed. Further, the lawsuit names two Forecast Foundation business entities, one registered in Oregon and the other in Estonia, for operating illegally in California while allegedly processing the initial coin offering transactions and misappropriating Liston’s holdings from Dyffy.
According to the lawsuit, Peterson, Gardner, and Costello conducted a hostile takeover of Dyffy, Gardner presided as president and Peterson as secretary over the dissolved Oregon non-profit, and all but Costello currently maintain shareholder status in the for-profit Estonian entity, with Peterson at the helm.
At the time of publication, the market capitalization of REP was $455 million. Liston is seeking $38 million in general damages and $114 million in punitive damages for a total of $152 million in collective damages — more than one-quarter of REP’s market value.
As such, Liston’s legal action constitutes the most significant private lawsuit in cryptocurrency history, superseding even damages sought from industry class-action lawsuits brought against cryptocurrency exchange Coinbase, the Nano cryptocurrency previously known as RaiBlocks, and token-backed marijuana startup Paragon Coin. The numbers, however, fall short of the industry’s more infamous class actions, which have totaled half a billion.
Liston’s attorney, O. Shane Balloun of Balloun Law, did not immediately respond to requests for comment from CoinDesk. Nor did Costello, Peterson or Patrick Gibbs, the lawyer at Cooley LLP representing the entire defense.
But Krug, who still advises Augur, denied the lawsuit’s claims.
“The claims are baseless and inaccurate,” Krug said in a prepared statement. Liston, he said, “accepted a cash severance payment and he signed a full release with Dyffy, and we’re appalled that he’s turned around with a lawsuit three years later.”
Disputing the extent of Liston’s role in the project, Krug went on, “there hasn’t been a single GitHub commit by Liston, on any of the Augur repositories. He’s not a founder of Augur.”
In an email to CoinDesk, Gardner wrote that many of the claims are “demonstrably false” and “this is a superfluous lawsuit if there ever was one.”
Balloun, a former Gmail and Google Product Search engineer, filed the complaint on Liston’s behalf in San Francisco County, California, on April 19, amending it on May 10 to incorporate other information applicable to the claims.
The court has scheduled a hearing in September 2018 for both sides to attend, where the case will be assigned a judge and a trial date will be set.
More at Source: The Record-Breaking $152 Million Battle Over Blockchain Betting Tool Augur – CoinDesk