- Plaintiffs — ParaFi, Framework Ventures, and 1kx — claim that Curve founder Michael Egorov was involved in deceptive practices.
- In the suit, the VCs say his ‘misappropriation of trade secrets’ resulted in financial damages.
- Egorov’s legal team says the lawsuit’s claims are ‘nothing more than a clever narrative.’
A high-stakes legal dispute is underway in San Francisco, involving three top crypto venture capital firms and the founder of popular decentralised exchange Curve.
The plaintiffs — ParaFi, Framework Ventures, and 1kx — claim that Curve founder Michael Egorov was involved in deceptive practices and misappropriation of trade secrets, resulting in financial damages.
Egorov’s defence team argues that the VCs’ allegations in a San Francisco court are a result of their ongoing litigation in Switzerland lodged in 2020.
“To justify their blatant forum shopping, Plaintiffs concocted a new and compelling story painting Egorov as an evil villain who duped three naïve VC firms into giving up ‘trade secrets’ (such as the names of widely known investors) and $1 million in invested funds (that Swiss Stake promptly offered to return),” Egorov’s lawyers say in the litigation, filed last month, which follows a series of filings in the California Superior Court from October.
“This tale of woe — which, in three years of Swiss litigation, plaintiffs somehow never mentioned — is fiction. It is nothing more than a clever narrative fabricated to save plaintiffs’ floundering Swiss litigation yet undermined by records that plaintiffs themselves cite,” they say.
Egorov, while employed by NuCypher in the US, devised the concept for Curve and developed a small-scale prototype, according to the lawsuit.
To expand Curve, he required VC investment and pitched his idea to the three VCs.
“Plaintiffs, each of whom were users of the Curve platform, decided to invest in Swiss Stake because they saw a unique and potentially profitable opportunity to help develop a highly successful automated market-maker,” the lawsuit filed by the VCs says.
“Egorov needed capital. He needed the legitimacy provided by California-based DeFi venture funds to get his project off the ground,” the VCs claim in the filing.
The VCs allege that Egorov made false statements regarding the manner in which their assets would be deployed at Swiss Stake GmbH, a company that holds the licence of Curve.
Egorov convinced the VCs that their assets would be used to hire developers, lawyers, and other staff, the documents allege. However, the VCs said in their suit that Egorov had no intention of relinquishing control of Curve.
The lawsuit further alleges that Egorov justified “significantly shifting the power [to govern Curve] in his favour” by explaining that he locked up more CRV, Curve’s governance token, than he intended.
Rather than relinquishing power to the Curve DAO, Egorov sold just enough of his CRV tokens to generate profits while maintaining overwhelming control, they claim.
“Egorov has grown rich from his fraud,” the lawsuit states. “Because he deposited plaintiffs’ funds into Curve’s liquidity pools, Egorov has received CRV tokens and fees as an incentive for providing liquidity.”
It also alleges that Egorov has sold millions of dollars’ worth of CRV tokens — tokens that the plaintiff argues belonged to them.
The VCs claim that they have not received the promised equity in Swiss Stake, their nearly $1 million in funding was never returned, and they never received the tens of millions of dollars’ worth of CRV that they claim they were entitled to.
They also allege that they lost business opportunities with Curve’s competitors “while Egorov was stringing them along.”
Michael Egorov said he will comment after discussing with his lawyers. Attorneys for the VCs said they will provide comments later. Santiago Santos, formerly at ParaFi, and Lause Clausen, of 1kx, declined to comment to DL News.
This story is developing.
The two co-founders of DL News, who aren’t mentioned in the lawsuits, were previously core contributors to the Curve protocol.