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ConsenSys Notches $7B Valuation Amid Flurry of Legal Challenges

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For the last few months the headlines around ConsenSys, the trailblazing blockchain lab and Ethereum dev shop, have smacked of controversy. 

In January, the firm’s former investment chief accused it of maintaining a “toxic” work environment  and sought $30M in damages in a lawsuit. Earlier this month a group of former employees petitioned Swiss authorities for a special audit of the venture’s books to investigate alleged irregularities.

On Tuesday, ConsenSys managed to report decidedly more welcome news: It’s raised $450M in a Series D raise that brings its valuation to more than $7B.

42% Increase

The funding punctuates impressive growth for its core infrastructure products. The monthly user base for ConsenSys’s MetaMask wallet exceeded 30M in January, marking a 42% increase in MetaMask users over four months. Its Infura Ethereum API also hosts 430,000 developers and facilitated more than $1T worth of annualized on-chain ETH transactions.

The round was led by ParaFi Capital, and also saw participation from new investors including Microsoft, Temasek, and SoftBank Vision Fund 2. Many investors that backed ConsenSys’ Series C round also returned, such as Third Point and True Capital Management.

The $450M will be converted into Ether to “rebalance the ratio of ETH to USD-equivalents” per the company’s treasury strategy. “This further builds ConsenSys’ ‘ultra-sound money’ position in advance of Ethereum’s upcoming merge to Proof of Stake,” the firm added.

A portion of the capital will be used to redesign ConsenSys’ popular MetaMask wallet, and to “accelerate the global adoption” of the Infura development suite. The new iteration of MetaMask is slated for release later this year. The expansion will also add 600 employees to ConsenSys’ payroll. The firm expects its total headcount to exceed 1,000 by the end of the year.

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Joseph Lubin has his hands full at ConsenSys.

However, the round comes as Joseph Lubin, ConsenSys’ co-founder and an influential figure in the formation of Ethereum, is addressing legal challenges.

On Dec. 31, Kavia Gupta, the former head of ConsenSys’ venture wing filed a lawsuit demanding $30M in damages and accusing the company of fraud and unjust enrichment. Gupta claimed that ConsenSys failed to properly compensate her for investments that generated more than $300 in revenue for the development studio or a 22x return. The firm denied the claims.

ConsenSys fired back in early January, filing its own lawsuit accusing Gupta of resume fraud. The complaint claims that she falsely claimed to hold credentials from MIT, Harvard Business School, and The World Bank. Gupta has denied the allegations.

Special Audit

Then on March 1, a group of 35 employees claiming to represent more than 50% of ConsenSys’ known shareholders asked a Swiss court to order a “special audit” scrutinizing the firm’s business practices. The requested audit would investigate alleged illegal transfers of intellectual property from ConsenSys AG (CAG) to the freshly created entity ConsenSys Software Incorporated (CSI) in August 2020.

The filing asserts that the transfers allowed “legacy financial institutions such as JPMorgan Chase” to acquire an “influential” stake in both MetaMask and Infura. It adds that the IP in question was leveraged as the basis for CIS’s Series C and Series D rounds.

With Joseph Lubin comprising the majority shareholder of both firms, the request claims that the IP transfer “was to the detriment of the minority shareholders of CAG and to the benefit of Joseph Lubin personally.”

ConsenSys has refuted the allegations. It described the filing as “factually inaccurate” and the product of a single former employee.

Read the original post on The Defiant

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