The developers of privacy-focused cryptocurrency ZCash (ZEC) is facing a legal challenge over defaults in making stock payments. Two weeks ago, an official complaint was filed with the Superior Court of California for the County of San Francisco.
This complaint was filed by an ex-employee of Zerocoin (the company behind ZCash), and according to the documents, the former owes the plaintiff about 15,000 units of stock dating back to 2016.
The plaintiff’s name is Simon Liu, and per the documents, he also claims that the company was legally unqualified to offer the equity in the first place.
Not Authorized to Issue Stocks
In part, the document reads, “Plaintiff is informed and believes, and thereon alleges, that Zerocoin did not have the authorization to issue common stock to employees in 2016, and that Defendants, and each of them, were aware that Zerocoin did not have such authorization.”
Liu reportedly joined Zerocoin as a Senior Software Engineer back in August 2016, and at the time, he was said to have signed an agreement with the company which would net him “incentive stock options to purchase” 12,000 stock units in the company.
The contract was however amended in October of the same year, and Liu was awarded an additional 3,000 Zerocoin stocks.
In addition to the fact that Zerocoin knowingly offered the equity despite being unqualified, Liu also claimed that the company’s management misled him into believing that he’d get “Founder’s Reward” pegged to the company’s number of outstanding shared, which, at the time, were counted to be 1,345,486 units. He eventually resigned in May this year.
In the complaint, Liu’s representative argued, saying that:
“Defendants knew the representation was false when they made it, or made the representation recklessly and without regard for the truth [that over a million units of Zerocoin existed].”
Zerocoin changed its name back in February so as not to get ZCash confused with the Zcash Foundation, a charity body. Liu also claimed that he requested to view the company’s financial records, but he was denied.
Crypto Winter to Blame
Electric Coin Company eventually responded to Liu’s request for information, claiming that they were simply unable to meet the obligations that were promised to the engineer, blaming their inability on the crypto winter, which “pushed [Zerocoin’s] current valuation down significantly from where it was when [Liu] began employment with [Zerocoin].”
The company isn’t particularly wrong. ZEC currently trades for $82.85 per token, with a total market capitalization of $558,000. Its record high was back in January 2018- the height of the crypto boom- when it had a $2.1 billion market cap and a token price of $710 (per data from CoinMarketCap)
A similar case was reported back in April, Blockonomi reported that popular crypto exchange Kraken was sued by an ex-employee who claimed that he hadn’t been paid his owed commissions. Jonathan Silverman, the Kraken ex-employee, sued the exchange for $900,000, and was reportedly seeking his compensations.
Silverman was hired by Kraken in 2017 and was in charge of running the exchange’s trading desk in New York. The terms of his employment included an undisclosed amount of stock options, a base salary of $150,000, as well as a 10 percent commission on profits made by the trading desk in a year.
After he left the firm, the firm was said to have agreed to pay him a $907,631 lump sum, but didn’t hold up their end of the bargain.