Why 1kx and other three crypto VCs "turned their faces" and sued the founder of Curve

Source: dlnews; Translation: Golden Finance 0xxz

Key Points

• Plaintiffs — ParaFi, Framework Ventures, and 1kx — allege Curve founder Michael Egorov was involved in fraud.
• In the suit, the VCs allege that he "misappropriated trade secrets" resulting in financial losses.
• Egorov's legal team said the lawsuit's claims were "nothing more than a clever narrative."

A high-stakes legal battle is underway in San Francisco involving three top crypto venture capital firms and the founders of popular decentralized exchange Curve.

The plaintiffs — ParaFi, Framework Ventures, and 1kx — allege that Curve founder Michael Egorov engaged in fraud and misappropriation of trade secrets, resulting in financial loss.

Egorov's defense team argued that the allegations made by the three VCs in the San Francisco court are the result of ongoing litigation they filed in Switzerland in 2020.

"In order to justify their blatant choice of litigation (Note: forum shopping, refers to the act of the parties taking advantage of the active conflict of international civil jurisdiction to choose a court that best satisfies their own claims to sue from among many courts with jurisdiction) , the plaintiffs concocted a compelling new story that portrayed Egorov as a villainous villain who duped three naive VCs into giving up 'trade secrets' (such as the names of well-known investors) and $1 million Invested funds (Swiss Stake immediately filed to return),” Egorov’s lawyers said in the lawsuit filed last month, which follows a series of lawsuits filed in California Superior Court in October.

"This unfortunate story - which was somehow never mentioned by the plaintiff during the three-year Swiss suit - is pure fiction. It was nothing more than a clever narrative concocted to save the plaintiff's troubled Swiss suit, but undermined by the record cited by plaintiffs themselves," they said.

According to the lawsuit, Egorov conceived the Curve concept and developed a small prototype while employed by NuCypher in the United States.

To scale Curve, he needed VC investment and pitched his idea to three VCs.

"The plaintiffs, all users of the Curve platform, decided to invest in Swiss Stake GmbH because they saw a unique and potentially profitable opportunity to help develop a highly successful automated market maker," the lawsuit filed by the three VCs states.

“Egorov needs funding. He needs the legitimacy provided by California DeFi venture funds to launch his project,” the three VC firms claimed in the filing.

The VCs allege that Egorov made false statements about how their investment in Swiss Stake GmbH, a company that holds a Curve license, was deployed.

The documents claim that Egorov convinced three venture capital firms that their investment would be used to hire developers, lawyers and other employees. However, Egorov has no intention of relinquishing control of Curve, the three venture capital firms said in the lawsuit.

The suit further alleges that Egorov justified “significantly shifting [controlling Curve] power toward himself” by locking up more of his CRV tokens than he intended.

Instead of handing over power to the Curve DAO, Egorov, they claim, sold a sufficient number of CRV tokens to make a profit while maintaining absolute control.

“Egorov obtained a substantial fortune from his fraudulent activities. As a result of his deposit of plaintiff’s investment in Curve’s liquidity pool, Egorov received CRV tokens and fees as an incentive to provide liquidity,” the lawsuit states.