• ConsenSys is subject to a multibillion-dollar audit due to alleged financial irregularities

  • On March 1, 35 former ConsenSys AG (CAG) employees, representing more than half of the business’s known stockholders, requested an audit into alleged financial irregularities within the company.

    According to PRNewswire, the special audit is being conducted in accordance with Article 697 et seq. of the Swiss Code of Obligations and concerns specific transactions totaling billions of dollars in valuation as part of a deal internally code-named “Project North Star.”

    According to the charges, CAG’s core intellectual property and subsidiaries were fraudulently transferred to a new organization, ConsenSys Software Incorporated (CSI), in exchange for a 10% stake in CSI and the repayment of a $39 million loan made by CAG’s founder, Joseph Lubin, in August 2020.

    As a result, JPMorgan Chase now has a significant investment in two of Ethereum’s most popular infrastructure tools, MetaMask and Infura.

    Personal gain in the billions

    A year after this event, CSI was able to raise $3 billion in capital, with the current round likely to reach $7 billion. Given that Joseph Lubin is the largest shareholder in both firms, the complainants allege that he benefited personally at the expense of CAG’s minority shareholders.

    Lubin and Frithjof Weinert served as directors at both CAG and CSI during the Project North Star transactions. This dual representation is regarded unconstitutional under Swiss law and is the basis for a closer examination in the United States, which could result in the nullification of the asset transfer.

    The CAG minority shareholders were unaware of the transfer since annual shareholder meetings were postponed after the 2018 meeting, in violation of Swiss law. Due to the delays, Weinert was able to be re-elected to the board of directors, the legitimacy of which is also being questioned, as is his authorization of the transaction.

    In response to minority shareholders attempting to assert their rights, Lubin announced a substantial reduction in CAG’s employees, reducing it from 1,200 at its height in 2017, to 30 by the end of 2022. The circumstances, according to the minority shareholders, have also led in a de facto liquidation of CAG without their approval.

    ConsenSys, headquartered in New York, is a blockchain technology startup created by Joseph Lubin. It specializes in the development of Ethereum-based DeFi apps, with a product package that includes MetaMask, Infura, Quorum, Truffle, and others that are used by millions of people.

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