ConsenSys Accused of Stealing Payment Startup’s Code for Rival Service

BlockCrushr claims investor ConsenSys abused its position of trust to gain access to its source code and create an alternative offering.

AccessTimeIconJul 16, 2020 at 3:49 p.m. UTC
Updated Sep 14, 2021 at 9:32 a.m. UTC

An Ethereum-based payments project claims in a new lawsuit that ConsenSys abused its position of trust as an investor to access trade secrets and create a rival offering.

  • BlockCrushr filed a complaint Tuesday alleging ConsenSys misappropriated its intellectual property to create a rival version of its payments system that allows recurring transactions, such as monthly payments, on the Ethereum blockchain.
  • A ConsenSys spokesperson told CoinDesk they did not usually comment on ongoing legal proceedings but expressed "severe disappointment that such baseless claims are even being filed."
  • Per the filing, ConsenSys Ventures invested $100,000 into BlockCrushr and invited the firm to participate in that year's Tachyon Accelerator program.
  • As part of the agreement, BlockCrushr said it shared its intellectual property, including 120,000 lines of source code, to help ConsenSys guide and support it.
  • Between October 2018 and February 2019, BlockCrushr said, ConsenSys had requested over 20 meetings to talk in depth about the payments system.
  • BlockCrushr, which is based in Canada, shared information because it was promised further investment, the filing states.
  • The startup said Vincente Hernandez, a developer with Token Foundry, another ConsenSys project, was present at many meetings.
  • The complaint alleges Hernandez put some of BlockCrushr's publicly available code in his own GitHub.
  • He is said to have became a founding member of Daisy Payments (now CodeFi), another recurring payment system, a few weeks later.
  • In February 2019, ConsenSys allegedly ceased communications with BlockCrushr and didn't return its calls.
  • As ConsenSys was still an investor, BlockCrushr says it informed the company privately that its payments system would launch on Aug. 23, 2019.
  • On Aug. 22, ConsenSys launched Daisy Payments, which BlockCrushr claims is a near-identical offering to its own.
  • BlockCrushr claims it was forced to cancel its own launch as a result.
  • CodeFi is now used as the foundation for ConsenSys' new staking service.
  • According to the filing, ConsenSys employees, including CEO Joe Lubin, said there was a firewall issue and that some of BlockCrushr's proprietary information may have been used by other teams.
  • However, BlockCrushr said no action was taken and communications stopped soon after.
  • The startup is now formally accusing ConsenSys of two counts of misappropriating trade secrets and one count of a breach of contract, and is suing for damages.

UPDATE (July 17, 09:05 UTC): This article has been updated with comment from ConsenSys.

Read the full filing below:


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