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The suit also names Polychain, Andreessen Horowitz, and the founder of Dfinity.
A class-action lawsuit has been filed against Dfinity in California, alleging that the company sold its native Internet Computer Project (ICP) tokens as an unregistered security.
Daniel Ocampo, a California resident, filed the complaint “on behalf of all investors who purchased Internet Computer Project tokens on or after May 10, 2021.”
The suit names Olaf Carlson-cryptocurrency Wee’s hedge fund Polychain Capital, venture capital firm Andreessen Horowitz, and Dfinity founder Dominic Williams as “controlling defendants.” Polychain and Andreessen Horowitz were among the early backers of the project.
Dfinity is a blockchain smart contract platform that aims to compete with the $370 billion cloud computing industry by introducing decentralised versions of popular apps such as Whatsapp, Linkedin, and Uber. Its ICP token would be used as a governance tool, to pay for network transaction fees, and as a reward for users who interact with the platform.
After a successful Genesis launch in May, ICP was listed on Coinbase Pro. Since then, its price has been extremely volatile.
Crypto intelligence firm Arkham Intelligence recently published a report on Dfinity’s native token after analysts noticed the token’s 90% price crash in its first month was highly unusual for a project with such heavyweight venture capital investment and technological ambition.
Arkham discovered that approximately $2 billion in ICP tokens were transferred to cryptocurrency exchanges by “probable insider addresses” following the Genesis launch, and that these transfers coincided with significant price drops.
According to the lawsuit, the 469,213,710 ICP tokens distributed during ICP’s Genesis launch event were “created out of thin air” and sold in violation of the 1933 Securities Act.
The suit also claims that the “controlling defendants” received 24 percent of the current supply of ICP tokens, with Polychain and Andreessen Horowitz taking the lion’s share.
According to reports, ICP tokens were sold to investors with the expectation that they would profit from the success of Dfinity’s Internet Computer Project in the future.
The report and class action suit conclude that Dfinity has not been transparent about the allocation of its ICP tokens, leaving long-time supporters and small investors in the dark while a small group of insiders profited handsomely from token sales.