A former employee, Simon Liu, is suing the Zerocoin Electric Coin Company for $2 million over unpaid shares, breach of contact, and damages, according to court documents filed on May 29.
Zerocoin is the organization behind the popular cryptocurrency Zcash (ZEC).
The complaint, filed in the Superior Court of California for the County of San Francisco, alleges Zerocoin founders made false promises regarding employee compensation and breached their fiduciary duty to employees.
Simon Liu joined Zerocoin as Senior Software Engineer in August, 2016. At that time, Liu entered into a contract with the company to receive “incentive stock options to purchase” 12,000 units of company stock. The company amended this agreement in October, 2016 to award Liu 15,000 units.
Liu, who resigned on May 28, 2019, now argues that “Zerocoin did not have authorization to issue common stock to employees in 2016, and that defendants were aware they did not have such authorization.” He also alleges that his superiors knowingly mislead him when saying he would receive a “Founders Reward” tied to the number of outstanding company shares then counted as 1,345,486 units.
“Defendants knew the representation was false when they made it, or made the representation recklessly and without regard for the truth [that over a million units of Zerocoin existed],” argued Liu’s representative Seth Wiener in the complaint. He also said they “had no reasonable grounds for believing it was true.”
On December 31, 2018 the company provided a status update that admitted Zerocoin had not created a stock option plan for its employees and that no formal option grants had been issued. One month later, the company published another internal statement outlining plans to “issue new shares in the Zerocoin Electric Coin Company, diluting everyone’s percentage of ownership interest.”
Before the lawsuit was filed, company representatives denied Liu’s request to examine their books and records.
In response to Liu’s ongoing requests for information, the company replied that they could not meet its promised obligations, “as the bear market has pushed [Zerocoin’s] current valuation down significantly from where it was when [Liu] began employment with [Zerocoin].”
Zcash currently trades around $79 and has an overall market cap of just under $600 million. Its all-time high in January 2018 saw valuations closer to $900 million.
Zerocoin is a limited liability company organized under the laws of the State of Delaware. It changed its name in February from Zerocoin to the Electric Coin Company to avoid confusion between Zcash and the nonprofit Zcash Foundation.
Liu does not recall the “true names and capacities of defendants sued” and is also claiming the defendants operate under fictitious names, according to the court records.
The case is unrelated to an ongoing $900,000 lawsuit involving a former employee at crypto exchange Kraken suing over unpaid wages.
Image via Shutterstock.
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