JP Morgan might compromise the decentralization of Ethereum

An ongoing investigation may compromise decentralization of Ethereum. Venture development studio ConsenSys’ shareholders want to look into possible irregularities of $1 billion within the organization.

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Jay Crypto

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Last updated Jul 27, 2022 at 6:59 PM

Posted Jul 26, 2022 at 4:00 PM

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The Ethereum venture development studio ConsenSys will be subject to a $1 billion audit, according to a report by Arthur Falls. Falls said that a majority of the company's shareholders requested this action to look into potential irregularities within the corporation.

The inquiry, which will be carried out in accordance with Swiss law, will be centered on an alleged unauthorized transfer of intellectual property from ConsenSys AG to a new company called ConsenSys Software Incorporated (CSI). This alleged transfer took place in exchange for a 10% ownership stake in CSI.

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Additionally, the audit will investigate a rumored loan offer of $39 million from Joseph Lubin, a founding member of ConsenSys and one of the eight founders of Ethereum along with Vitalik Buterin. Falls asserted that the alleged illicit transaction is a component of a top-secret program named "Project North Star."

The goal of this project was to provide JP Morgan and other traditional financial institutions "an influential interest" in MetaMask, a well-known cryptocurrency web wallet, and Infura, an Ethereum infrastructure provider that underpins a significant portion of this blockchain's ecosystem.

The accused illicit transfer allegedly occurred on August 14, 2020. Falls included:

“One year later, this intellectual property was used to raise funding for CSI at a valuation of $3 Billion, with rumors of a $7 Billion valuation for the current round. Joseph Lubin is the majority shareholder of both companies. The transaction was to the detriment of the minority shareholders of CAG and to the benefit of Joseph Lubin personally”.

Furthermore, the study alleges Lubin and a companion broke Swiss law when they both served as directors of the aforementioned businesses during the "Project North Star" campaign. Falls claimed that a corporation with a dual representation in both the European and American markets deserves "particular examination." What might constitute a serious blow to ConsenSys operations was added to the report:

“Due to this dual representation, the transfer of assets from CAG to CSI is expected to be void under Swiss law and likely also under US law.”

What An Audit Could Mean For The Ethereum Developer

In addition to the aforementioned, the article claims that ConsenSys reportedly improperly postponed shareholder meetings while investors were unaware of the deal. As an unofficial ConsenSys board member, Frithjof Weinert is meant to be Lubin's partner during Project North Star.

This could provide authorities additional justification to deem the alleged illicit transaction and its results void. As Bitcoinist noted in 2020, ConsenSys made a 14 percent employee reduction announcement. One of several announcements that will result in the company's reduction by approximately 90% was this one.

According to Falls' analysis, this cut may have been a result of Project North Star's apparent informal liquidation process:

“The minority shareholders state that the transfer of assets from CAG to CSI resulted in a de-facto liquidation of CAG, without the required consent of a shareholder meeting. The minority shareholders also state that in their actions related to Project North Star, the directors of CAG were in breach of their duty to act in the interests of CAG.”

Additionally, the audit will investigate a rumored loan offer of $39 million from Joseph Lubin, a founding member of ConsenSys and one of the eight founders of Ethereum along with Vitalik Buterin. Falls asserted that the alleged illicit transaction is a component of a top-secret program named "Project North Star."

The goal of this project was to provide JP Morgan and other traditional financial institutions "an influential interest" in MetaMask, a well-known cryptocurrency web wallet, and Infura, an Ethereum infrastructure provider that underpins a significant portion of this blockchain's ecosystem.

The accused illicit transfer allegedly occurred on August 14, 2020. Falls included:

“One year later, this intellectual property was used to raise funding for CSI at a valuation of $3 Billion, with rumors of a $7 Billion valuation for the current round. Joseph Lubin is the majority shareholder of both companies. The transaction was to the detriment of the minority shareholders of CAG and to the benefit of Joseph Lubin personally”.

Furthermore, the study alleges Lubin and a companion broke Swiss law when they both served as directors of the aforementioned businesses during the "Project North Star" campaign. Falls claimed that a corporation with a dual representation in both the European and American markets deserves "particular examination." What might constitute a serious blow to ConsenSys operations was added to the report:

According to the minority shareholders, CAG was effectively liquidated as a result of the asset transfer from CAG to CSI without the needed approval of a shareholder meeting. The minority shareholders claim that the board of CAG violated their obligation to act in the best interests of CAG by their activities regarding Project North Star.

The 50% of CAG shareholders who are involved publicly ask that everyone who owns CAG shares or who has been promised shares get in touch with consensysaction@gmail.com. All those who have suffered harm will get aid from us. We will press for justice to be served through the Swiss legal system and fight to get the IP and subsidiaries returned to CAG. We are prepared for the impending legal fights and have no interest in settling for less.

Conclusion:

With dozens of games and financial apps running on top of the Ethereum blockchain, Ethereum is a worldwide, decentralized platform for money and new sorts of applications. The cryptocurrency is so well-liked that other digital currencies operate on its network. If a legal battle starts, the whole network will be under scrutiny, which can compromise decentralization of Ethereum.  

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