Blog Digital Currency Perspectives August 28, 2019

Tezos ICO Cases, No. CJC-18-004978 (Cal. Super. Ct. filed on Aug. 28, 2019)

On August 28, 2019, the Superior Court of California for the County of San Francisco granted the motion of Tezos Stiftung (“Tezos”) to quash service of summons for lack of personal jurisdiction over the plaintiff’s claims. The putative class action complaint alleged that Tezos violated Sections 12(a) and 15 of the Securities Act by selling unregistered securities.

In July 2017, Tezos allegedly conducted an ICO of tokens called “XTZ” or “Tezzies” that raised proceeds worth more than US $230 million. Tezos allegedly sought to raise capital for its blockchain network on which XTZ would operate. The complaint alleged that the court had personal jurisdiction over Tezos because Tezos sold XTZ to California residents through its website, Tezos’ founders resided in California, and a federal judge had recently ruled that there was personal jurisdiction over Tezos in a related federal action.

Tezos moved to quash the plaintiff’s summons for lack of personal jurisdiction. The court granted Tezos’ motion, holding that (1) even though California residents participated in the ICO, Tezos’ website was not purposefully directed towards Californians; (2) the residency and conduct of Tezos’ founders did not justify the exercise of personal jurisdiction over Tezos; and (3) the legal standard for exercising personal jurisdiction differed between federal and state courts such that the court did not need to follow the ruling of a federal judge in a related federal case.