- VC firms ParaFi, Framework Ventures, and 1kx sued Curve founder Michael Egorov.
- They accuse him of deceptive practices and misappropriation of trade secrets.
- Egorov, as well as the VCs’ lawyer and an outside legal expert, outline the case for DL News.
A high-profile legal battle pits three prominent crypto venture capital firms against the founder of a top decentralised finance protocol.
VC firms ParaFi, Framework Ventures, and 1kx sued Michael Egorov, the founder of decentralised exchange Curve, accusing him of deceptive practices and misappropriation of trade secrets. The VCs are seeking “punitive damages in an amount to be determined at trial.” DL News reported the lawsuit last week.
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Since then, the legal clash has ignited a flurry of reactions from all sides, giving rise to a display of grievances, counter-allegations, and varying interpretations of the proceedings.
“The plaintiffs don’t cease to amaze me with the ways they try to distort the truth — so far unsuccessfully for them,” Egorov told DL News.
One could find those trade secrets ‘in any book on venture capital purchased on Amazon or borrowed from your local library.’
Egorov said he wants “to warn other companies about these VCs.”
Nima Mohebbi, partner at Latham & Watkins, the law firm representing the VCs, told DL News: “Our clients are resolved to seek full accountability of Michael Egorov for his behaviour.”
Trade secrets of raising venture capital
The VCs claim that Egorov owes Curve’s success to them because he allegedly misappropriated trade secrets.
The VCs contend in their lawsuit that Egorov never planned to surrender control of Curve.
According to the suit, those secrets included industry contacts, “potential investors to be included in the capitalisation table,” and “knowledge of how to manage an investment round,” including how to allocate equity and tokens among investors.
Gabriel Shapiro, an attorney with no involvement in the lawsuit, told DL News that one could find those trade secrets “in any book on venture capital purchased on Amazon or borrowed from your local library.”
Silicon Valley vs Alpine jurisdiction
Egorov is embroiled in a similar, but separate, lawsuit with the VC trio in Switzerland. That’s where he founded his company, Swiss Stake GmbH, which developed Curve.
He argues that the VCs’ allegations in a US court are a result of their ongoing litigation in Switzerland lodged in 2020.
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The VCs claim that Egorov misled them about how their investments would be used at Swiss Stake. According to the lawsuit, Egorov assured the VCs that their funds would be directed towards expanding the team with developers, lawyers, and additional staff.
The VCs contend in their lawsuit that Egorov never planned to surrender control of Curve.
Egorov said the VC firms “brought nearly the same lawsuit three years ago in Swiss court, alleging that we wrongfully terminated an investment agreement with them.”
“Multiple Swiss courts have sided with us several times, reasoning that we were simply following the contract’s terms,” he said.
‘Anyone claiming otherwise is either misinformed or attempting to mislead’
US government agencies have recently initiated a series of policies and lawsuits in a crackdown on the crypto industry. Egorov said the VCs may be attempting to “perhaps to leverage the hostile crypto climate there.”
Shapiro described the US lawsuit as an “attempt to get a second bite at the apple in plaintiff-friendly US courts.”
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The complaint says Egorov convinced the VCs “through fraud to agree to a Swiss forum-selection clause in the investment agreements.”
“Egorov then fled the United States for Switzerland at around the same time that he executed the final steps of his scheme … seeking to evade the jurisdiction of the US courts on the basis of his fraudulently-induced forum-selection clause.”
Mohebbi, the attorney for the VCs, told DL News that the Swiss proceeding is “in its early stages.”
“Anyone claiming otherwise is either misinformed or attempting to mislead,” Mohebbi said.
‘One does not simply yeet funds back’
“The bottom line is, after entering into an agreement and using our clients’ funds, Egorov refused to honour his promises and contractual obligations,” Mohebbi said. “Agreements matter.”
“Our clients simply want what Egorov owes. Our complaint is highly detailed in facts — and those facts speak for themselves. We intend to hold Egorov to account for his conduct both in the US and in Switzerland.”
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A major point of contention in the lawsuit is the claim that Egorov failed to return $1 million to the VCs after their agreement fell through. Egorov’s defence argues that his company “promptly offered to return” $1 million in invested funds back to the VCs, but that offer was never taken up.
The VCs sent $1 million through an on-chain transfer, and Shapiro said that “naturally, one does not simply yeet funds back to a sending address, as the intended recipients could then claim they don’t have access and one would still owe $1 million after having already paid.”
Mohebbi did not specifically respond to these claims.
Mutual disappointment
Egorov said “it’s disappointing that with so many exciting DeFi projects building all over the world, plaintiffs spend their time litigating against a party they hoped would be a portfolio company.”
‘The complaint speaks for itself’
“It’s even more disappointing that it was counsel for ParaFi that drafted the agreement they are suing upon — an agreement that literally prohibits filing this suit in California.”
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Mohebbi said while “it is regrettable this has reached the point of litigation,” they “strongly believe the facts are on our side.”
“In that respect, the complaint speaks for itself,” Mohebbi said.
Santiago Santos, formerly at ParaFi, and Lause Clausen, of 1kx, declined to comment. Vance Spencer, of Framework Ventures, did not immediately respond to a request for comment.
Disclaimer: The two co-founders of DL News, who aren’t mentioned in the lawsuits, were previously core contributors to the Curve protocol.