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Tezos, one of the largest Initial Coin Offerings (ICOs) technology projects which has raised more than $230 million since July, has come under fire as a class-action lawsuit has been filed in a California state court against its organizers.

For those unfamiliar with ICOs, they are a type of digital stock certificate. Think of an ICO like a initial public offering (IPO) gone crypto. It's essentially a way for a cryptocurrency business to raise funds without being hampered by the cumbersome steps founds with venture capitalists and banks.

This case has become one of the most notorious ICO cases involving the cryptocurrency Tezos. Previously, this project was considered a mammoth and successful offering at the time. 

It seems the company has since fallen from grace and is being discredited as a class-action lawsuit has been filed against its organizers, alleging that it violated US securities laws while also misleading investors about the company.

Reuters, citing a lawsuit filed on October 25 in California Superior Court, San Francisco, argued that the people behind Tezos violated U.S. securities laws and defrauded investors, because no digital coins have yet been issued and "participants were told they were making a donation and may never receive any."

The defendants include co-founders Kathleen and Arthur Kreitman and their Delaware-based company, Dynamic Ledger Solutions Inc, which owns the Tezos source code and Strange Brew Strategies, a communications firm hired to promote the venture. 

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This year, ICOs have been under scrutiny as the Securities and Exchange Commission (SEC) warned that ICO promoters had skirted securities laws by issuing digital tokens on behalf of virtual companies, a practice that could hamper the appetite for ICOs. 

Celebrities such as boxing champion Floyd Mayweather, rapper Ghostface Killah and socialite Paris Hilton have all endorsed ICOs in the past. The SEC has sent out a stern warning to celebrities to disclose paid endorsements of ICOs they've promoted. The full SEC statement can be found here

"Tezos's recent initial coin offering, for example, was not registered under the Exchange Act and raised approximately $230 million in US dollars," Trace Schmeltz, a partner in the Chicago and Washington, D.C. offices of Barnes & Thornburg LLP, explained to "The offerers reportedly consider each investor to have made a "non-refundable donation," rather than an investment. Now, there are rumors that the Tezos project is stalled by infighting and that reports of the adoption of its blockchain technology are greatly exaggerated. If the project fails, the investors may have a difficult time pursuing recovery from the offerers." 

Despite this most recent scandal, the ICO market continues to gain traction and attract capital. Many businesses are seeing an influx of ICOs popping up all over the world. 

David Wachsman, CEO of PR firm Wachsman that has a number of cryptocurrency clients, is optimistic,

"Rumors of a declining ICO market are probably unfounded," he said. "Although only a limited number of ICOs are presently up on popular listing sites, at Wachsman we typically receive between ten and 30 new business inquiries per day, most of which are for upcoming ICOs from all over the world. Amidst the noise, a few - about 1-5% - might be excellent projects worthy of conducting additional due diligence." 

"Although we may see a significant swath, there is no way we're getting the first look at everything," he added. "There must be far more out there. But based on the demand we're experiencing alone, the supply of ICOs isn't shrinking anytime soon."

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