Tezos Co-Founder Fined for Hiding Cryptocurrency Activity

US Watchdog penalizes Arthur Breitman for not revealing Tezos development while working for Morgan Stanley

by Marin Marinov
20 April • 2.5 min
In Coins

Tezos (XTZ) co-founder Arthur Breitman has been fined by the Wall Street watchdog FINRA for failing to disclose his involvement in the XTZ cryptocurrency project during his time at Morgan Stanley, Reuters reported on Friday.

Tezos co-founder was penalized with suspension from associating with broker-dealers for two years and fined USD 20 000 for not announcing his outside business activity between 2014 and 2015, including his work on the development of the cryptocurrency XTZ and the blockchain-based Tezos network. Moreover, Breitman falsely verified that he had disclosed all required information in two Morgan Stanley compliance questionnaires, FINRA concludes.

The settlement

In the settlement agreement with FINRA, signed on April 18, Breitman neither admitted nor denied the accusations but accepted the penalties. The Wall Street self-regulatory body requires registered securities professionals like Breitman to provide prior written notice to their employer if they have outside business activities with a “reasonable expectation of compensation.”

FINRA cited „Tezos Business Plan “ from 2015 that valued the cryptocurrency and blockchain project between USD 2 billion and USD 20 billion after 15 years. The plan also named Arthur Breitman as chief executive officer (CEO).

“The settlement with FINRA is unrelated to and has no impact on the launch of the Tezos network,” Sarah Lightdale, an attorney for Breitman, said in a statement. “Arthur cooperated fully with FINRA at all times and Arthur is pleased to put this personal matter behind him,” Lightdale was quoted as saying by Reuters.

Tezos project

A previous investigation by Reuters revealed that Arthur Breitman wanted to establish a business, based on Tezos, but was trying not to be associated publicly with the Swiss-based project. Breitman had published two papers about Tezos under the pseudonym L. M. Goodman, because of concerns that cryptocurrency activities might be a conflict of interest with his work for Morgan Stanley:

“Breitman`s use of the L.M. Goodman pseudonym to promote Tezos … effectively concealed Breitman’s involvement with Tezos from Morgan Stanley”, FINRA concluded.

Tezos, a project for cryptocurrency and decentralized blockchain-based network, was founded by Arthur Breitman and his wife Kathleen in 2015 in Switzerland. They established Tezos Foundation for running the activities and appointed Johann Gevers as CEO. After successful initial coin offering (ICO) that raised USD 232 million in July 2017, the project is put on hold because of an ongoing court battle over control of the foundation between Breitmans and Gevers. XTZ tokens are still not issued to the contributors of the ICO.