In the latest setback to befall the Tezos project, co-founder Arthur Breitman has been sanctioned by FINRA. Breitman is barred from contact with broker-dealers for two years and has been fined $20,000.
In a settlement agreement dated April 18, the Financial Industry Regulatory Authority (FINRA) suspended Tezos co-founder Arthur Breitman from associating with broker-dealers for two years and assessed him a $20,000 fine. Per Reuters, Breitman neither admitted to nor denied making false statements about his outside business activities while he was an employee of Morgan Stanley and registered member of FINRA.
An attorney for Breitman, Sarah Lightdale, said in a statement, “The settlement with FINRA is unrelated to and has no impact on the launch of the Tezos network.”
In addition to the trouble that FINRA’s actions could cause for Tezos’ highly anticipated but not yet launched network, the company continues to face the specter of its associated tokens (Tezzies) being deemed securities. If the principals behind Tezos are found by the US Securities and Exchange Commission (SEC) to have sold unregistered securities, this could trigger SEC penalties and additional sanctions from FINRA.
In February, at UCLA’s Cyber Days, ETHNews asked Kathleen Breitman – Arthur’s business partner and wife – whether Tezos was under investigation by the SEC. She declined to address the inquiry directly. Breitman shifted uncomfortably in her chair and said that she does not regard Tezos as a securities offering.
If the SEC is in fact investigating the issues and disagrees with her opinion, Tezos and its associated partners could be compelled to return all of the bitcoin and Ether that they received. They are currently defendants in multiple class-action lawsuits seeking that relief, which allege that the Tezos initial coin offering (ICO) constituted the sale of unregistered securities.
Although the Tezos Terms of Allocation referred to contributions through the ICO as “non-refundable donation[s],” that doesn’t magically make them exempt from securities laws.
“Donations are usually gifts with no reciprocal exchange,” according to securities attorney Amy Wan, who spoke with CrowdfundInsider this past November. “One usually doesn’t receive tokens that presumably will skyrocket in value when making a ‘donation.’ Supporters were likely backing Tezos because they were speculating about its tokens as an investment opportunity,” she added.
In February, Kathleen Breitman also claimed that the project would “go rogue” and launch within approximately four weeks, a development timeline that has long been exceeded. In the intervening months, the president of the Tezos Foundation, Johann Gevers, tendered his resignation and several new faces were added to the Swiss organization’s board.
In July 2017, Tezos raised a jaw-dropping 65,703 bitcoin and 361,122 Ether – then the equivalent of $232 million. If the company has held onto its cryptocurrency assets, those holdings could now be worth nearly $772 million.
Matthew is a writer with a passion for emerging technology. Prior to joining ETHNews, he interned for the U.S. Securities and Exchange Commission as well as the OECD. He graduated cum laude from Georgetown University where he studied international economics. In his spare time, Matthew loves playing basketball and listening to podcasts. He currently lives in Los Angeles. Matthew is a full-time staff writer for ETHNews.
ETHNews is committed to its Editorial Policy
Like what you read? Follow us on Twitter @ETHNews_ to receive the latest FINRA, Financial Industry Regulatory Authority or other Ethereum law and legislation news.