A former employee of the Zerocoin Electric Coin Company, the startup behind the Zcash (ZEC) cryptocurrency, has sued the firm seeking $2 million over reported breach of contract, unpaid shares, and other damages.
Simon Liu, in a court filing of May 29 at the Superior Court of California for the County of San Francisco, alleges that the founders of Zerocoin misled him with false promises about compensation of employees.
They also reportedly breached the fiduciary duty they had towards their employees.
Liu joined Zerocoin in August 2016 and worked as the company’s Senior Software Engineer. He allegedly was offered a contract by the company that allowed him to acquire 12,000 units of “incentive stock options,” from the company. Zerocoin then amended the said contract in October, (two months after he joined), awarding Liu 15,000 units.
Liu stayed at the company till May 28, 2019, when he resigned.
The ex-employee argues that though Zerocoin offered him the deal, at the time (2016) they (the company) were not authorized to issue common stock. He goes on to say that the firm’s founders were well aware of this fact even as they proceeded without due authorization.
Additionally, Liu states that his superiors deliberately misled him into believing that he would get a “Founders Reward.” According to him, the reward would allegedly have been tied to the volume of outstanding Zerocoin shares that stood at 1,345,486 units at the time.
Through his legal representative Seth Wiener, Liu argues that the defendants were aware that their account “was false” at the time. They also proceeded irresponsibly with no consideration for the truth. The claim relates to the company chiefs alleging at the time that Liu would get a reward without proof that there actually existed over a million shares of Zerocoin.
Seth Wiener noted that Liu’s superiors did not have any “reasonable grounds” upon which to believe that the million plus units truly existed.
Zerocoin provided a company status update on December 31, 2018, which contained an admission that the company did not have a stock option plan meant for employees. It also stated that there had been no issuance of any formal option grants.
A month later, the startup released one more internal statement in which it outlined plans for issuance of “new shares” in the company. The move allegedly watered down the “percentage of ownership interest,” held by every other person.
Prior to the lawsuit, Zerocoin representatives had refuted claims that Liu had requested to be allowed to examine the company’s books and other records.
Liu has said that he doesn’t recall the “true names and capacities” of the entities in his suit and alleges that the defendants use fictitious names.
The response from the company in lieu of Liu’s requests is that Zerocoin is unable to fulfill its promised obligations due to the bear market. The startup points out that the crypto bear market significantly reduced its market valuation and that it is not as it was when the ex-employee began working with them.
At the moment, Zcash (ZEC) trades at about $81 with a market cap of $550 million, though it was about $900 million at the beginning of 2018.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.