According to a report from Arthur Falls, Ethereum venture production studio ConsenSys will face a billion-dollar audit. A majority of the company’s shareholders, Falls said, asked for this measure to investigate alleged irregularities at the company.
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To be conducted under the Swiss Code of Obligations, the investigation will focus on an alleged illegal transfer of intellectual property from ConsenSys AG to a new entity dubbed ConsenSys Software Incorporated (CSI). This supposed transfer occurred in exchange for 10% ownership of CSI.
In addition, the audit will look into a supposed offer of a $39 million loan from Joseph Lubin, one of the eight Ethereum founders alongside Vitalik Buterin and a founder at ConsenSys. The alleged illegal transaction, Falls claimed, is part of a secret initiative called “Project North Star”.
The purpose of this project was to transfer “an influential stake” in MetaMask, a popular crypto web wallet, and Infura, an Ethereum infrastructure provider which supports an important part of this blockchain’s ecosystem to JP Morgan and other legacy financial institutions.
This supposed illegal transfer took place on August 14th, 2020. Falls added:
One year later, this intellectual property was used to raise funding for CSI at a valuation of $3 Billion, with rumors of a $7 Billion valuation for the current round. Joseph Lubin is the majority shareholder of both companies. The transaction was to the detriment of the minority shareholders of CAG and to the benefit of Joseph Lubin personally.
Furthermore, the report claims Lubin and a partner supposedly violated Swiss law as they both acted as directors of the aforementioned companies during the initiative “Project North Star”. Both in the European country and the United States a dual representation of a company, Falls said, merits “special scrutiny”. The report added what could be a major blow to ConsenSys operations:
Due to this dual representation, the transfer of assets from CAG to CSI is expected to be void under Swiss law and likely also under US law.
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In addition to the above, the report adds that ConsenSys allegedly illegally delayed shareholder meetings, investors were unaware of the transaction. Lubin’s partner during Project North Star is supposed to be Frithjof Weinert, acting as an unconfirmed ConsenSys board member.
Thus, potentially adding more reasons for the supposed illegal transaction and its outcomes to be declared invalid. As Bitcoinist reported back in 2020, ConsenSys announced a 14% cut of its staff. This was one of several announcements that will see the company shrinking by almost 90%.
Falls’ report reveals that this reduction could have been part of Project North Start as part of an apparent informal liquidation process:
The minority shareholders state that the transfer of assets from CAG to CSI resulted in a de-facto liquidation of CAG, without the required consent of a shareholder meeting. The minority shareholders also state that in their actions related to Project North Star, the directors of CAG were in breach of their duty to act in the interests of CAG.
As of press time, Ethereum trades at $2,966 with a 0.39% loss on the 4-hour chart.