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In October 2017, Gevers — the Tezos Foundation president at the time — told Reuters that they had a contract, according to which the Breitmans would sell DLS to the foundation "within a reasonable point of time" or else the Tezos Foundations would acquire it free of charge, although he declined to provide a copy of the agreement.
The delay could be explained by the fact that the relationship between Gevers and the Breitmans was compromised. A dispute began after the couple was opposed to the recruiting of some people the foundation indicated it wanted to hire, as Gevers told Reuters — and the information obtained by Wired confirms it. Moreover, according to Gevers, DLT kept control over “the foundation's domains, websites and email servers,” adding fuel to their conflict.
On October 15, one of the Breitmans’ lawyers sent a 46-page letter to remaining board members — excluding Gevers — claiming that Gevers was guilty of “deception and self-dealing,” and that he wanted to acquire a “license to print money.” Thus, the Breitmans called for Gevers’ prompt removal. In response, Gevers claimed he became the target of a “character assassination” and reportedly filed a complaint with Swiss regulators regarding an email from the foundation's two other board members, in which they asked him to step down. He had also halted all payments within the company so that his contract would be settled — Gevers demanded the settlement for being “de-facto executive director” of Tezos Foundation.
Consequently, the distribution of tokens was delayed, and Tezos — namely, DLS — became the target of several class-action lawsuits after Reuters obtained the aforementioned letter and published an investigation regarding Tezos, arguing that the startup was falling apart amid internal power struggle. The legal action concerned compliance with U.S. Securities and Exchange Commission (SEC) regulations. The lawsuits claimed that Tezos tokens should be considered securities under U.S. law, meaning they would have had to be registered with the SEC to be sold legally to investors. Notably, in February 2018, the SEC refused to release Tezos documents, after it was requested by attorney David Silver via the Freedom of Information Act (FOIA), arguing that it could hurt “enforcement activities.” In April, SEC Commissioner Robert Jackson famously claimed that he hadn’t yet seen an ICO that wasn’t a security.
Nevertheless, at a UCLA conference in the same month, Kathleen Breitman promised to “[go] rogue in the next few weeks” and release the “tezzies” tokens (XTZ) on their own terms, despite legal troubles. “Things needed to move forward. It’s unfair, but we need to ship the code,” Breitman claimed.
Soon after her speech, two board members of the Tezos Foundation — including its president Johann Gevers — left their positions, and Ryan Jesperson — the founder of T2 Foundation, which is a community-driven outfit that supported the Bretimans in their conflict with Gevers (WSJ points out that he had spent more than $50,000 of his own money to launch it — became president of the board. It is unclear under which terms Gevers left, although he wrote on Twitter that he was “happy” with the reshuffle.
The delayed launch came with more complexities
On June 10, Tezos Foundation unexpectedly announced the implementation of Know Your Customer/Anti-Money Laundering (KYC/AML) checks for contributors, essentially asking the participants of the ICO — which happened almost a year ago — to authorize themselves. The statement read:
“The Foundation values and respects the privacy of its contributors, and along with countless others around the world, it opposes the unnecessary collection of personal information that has become pervasive on the Internet. However, it is important to comply with a rapidly evolving regulatory landscape. To that end, performing KYC/AML checks – as has become the norm for blockchain projects – is the best way forward.”
The move was met with negative reaction from the community, while it could be argued that Tezos is preparing to work with the regulators. Notably, in a Reddit thread discussing the KYC check, Arthur Breitman wrote that it was not his “call”. Ethereum’s founder Vitalik Buterin commented on the news as well, asking on Twitter:
“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.”
Ironically, the KYC check prompted the Tezos community to split even before the actual launch, despite the emphasis on unity that was postulated in the original Tezos white papers: nTezos — the self-described “instantiation of Tezos” — and the “independent and self-governed” network with an emphasis on the lack of KYC checks emerged, essentially signaling an incoming fork.
On June 30, in an official statement, Tezos Foundation announced the launch of its beta network, calling the move an “inflection point” for the project. Now the users can start validating — ‘baking’ — blocks after the first seven cycles, which the Tezos team estimates will be in about three weeks. However, no block rewards will be issued during this period “as baking rights are unassigned,” the announcement warns.
In their announcement, the company asked community members to take precautionary measures to ensure the security of their tokens while interacting with the betanet, as the project is still in beta. Sticking to its principles, Tezos also warned that there is nothing they can do if “tezzies” tokens (XTZ) are lost or stolen, and that all transactions performed on the betanet will be merged onto the mainnet.
Accordingly, the betanet is reportedly being introduced in anticipation of a broader main network launch in the future, supposedly in the third quarter of 2018. Some exchanges, including Gate.io and HitBTC, have already listed XTZ for trade. Currently, XTZ is the third most traded coin on Gate.io, with a volume of 9.34 percent.
