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The EOS Network Foundation is forging ahead with a milestone legal challenge against former EOS developer Block.one, which it accuses of failing to uphold a promise to invest $1 billion in the project.
In a legal update published July 26, ENF CEO Yves La Rose said the failure of Block.one to live up to its promises is one of the biggest issues facing the EOS Network community. Later that day, La Rose tweeted that the community has a choice of three legal avenues they can pursue in order to seek compensation from the developer.
Decision Time For EOS Investors
The first option is to join the ENF’s existing U.S. class action lawsuit, which was filed against Block.one several years prior. According to La Rose, the ENF is on the verge of settling with Block.one for the sum of $22 million. EOS community members have until August 23, 2023 to decide whether they’d like to join this class action suit, or opt out and pursue other legal options.
By joining the class action, investors would forfeit their right to make any other future claims against Block.one. This is legally binding as the class action includes a clause that shields Block.one from any further action against it by those who participate. Those interested in either joining the suit or opting out should contact James Koutoulas at [email protected].
Anyone who purchased EOS tokens or ERC-20 tokens directly from Block.one or certain cryptocurrency exchanges between June 26, 2017 and May 18, 2020 could be eligible to participate in the U.S. class action, La Rose said. More information on the lawsuit and its eligibility requirements can be found here.
As an alternative, La Rose said Nemesis Venture Capital is pursuing a separate agreement with Block.one on behalf of EOS community members that choose to opt out of the ENF’s class action. La Rose said it’s likely that anyone interested in seeking compensation through this avenue would need to opt out of the U.S. lawsuit.
The third option for investors is not guaranteed at this time. Apparently, the ENF is exploring the possibility of filing a separate claim against Block.one in the Cayman Islands, and once again, investors would need to opt out of the U.S. class action to pursue this alternative.
Early EOS investors therefore face a tough decision. The ENF’s U.S. class action is expected to settle on September 30, 2023 and is likely to result in participants receiving compensation soon. However, investors who decide to pursue one of the other legal alternatives could potentially receive much more, though there is a risk that the action may fail and they end up with nothing.
Why Is This Happening?
The ENF has been engaged in a long and bitter struggle against Block.one to receive compensation for those who invested in EOS during its initial coin offering back in 2018. At the time, EOS raised a record $4.1 billion through the ICO. Many felt the network was uniquely positioned to rival Ethereum as the number one smart contract network.
Unfortunately for EOS’s backers, the project struggled to live up to its billing. A lack of development and a failure to meet the milestones on its original roadmap meant EOS fell behind not only Ethereum, but also many other emerging blockchains. By 2020, the EOS token’s value had fallen to a fraction of its ICO price.
The EOS community placed the blame on Block.one, the project’s lead developer, saying it had failed to invest the promised $1 billion in the network. After waiting several years for Block.one to get its act together, the EOS community ultimately took matters into its own hands. This led to the birth of the EOS Network Foundation, led by La Rose, who was previously the CEO of an EOS block producer called EOS Nation. Soon after it was founded in August 2021, the ENF began plotting to displace Block.one and take control of the EOS network.
La Rose collaborated with other EOS block producers on a plan to create a hard fork of the EOS network, which was done in September 2022, a day now known as “EOS Independence Day”.
Since then, the ENF has focused its energy on revamping EOS so it can genuinely compete with Ethereum and other chains, and it has made great progress over the last two years. Even so, the ENF refused to let Block.one to escape punishment, pursuing legal action to force it to account for its lack of investment.
Possible Implications For Crypto?
The outcome of the ENF – Block.one dispute could have some serious consequences for the wider blockchain community, due to its focus on a developer not honoring its commitments to investors. Many times, crypto investors have had little to no recourse when they invest in projects that fail due to the lack of effort by its developers, or in some cases, outright scams. This case could therefore set a legal precedent that enables other investors to seek damages in similar situations.
Ultimately, the outcome of the ENF’s legal proceedings against Block.one could lead to major changes in the way crypto fundraising activities are conducted, hence the industry is watching very closely to see how it develops.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.