Why did 1kx, Three Arrows Capital, and Polychain Capital “fall out” and sue the founder of Curve for encryption VC?

Why did investors sue Curve's founder over encryption VC?

Source: dlnews; Translation: Blocking0xxz

Highlights

• The plaintiffs – BlockingraFi, Framework Ventures, and 1kx – allege that Curve founder Michael Egorov engaged in fraudulent behavior.

• In the lawsuit, the VCs claim that he “misappropriated trade secrets” resulting in economic losses.

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• Egorov’s legal team says the claims in this lawsuit are “nothing more than a clever narrative.”

San Francisco is in the midst of a high-stakes legal dispute involving three top crypto venture capital firms and the founder of popular decentralized exchange Curve.

The plaintiffs – BlockingraFi, Framework Ventures, and 1kx – allege that Curve founder Michael Egorov engaged in fraudulent behavior and misappropriated trade secrets resulting in economic losses.

Egorov’s defense team argues that the allegations made by the three VCs in a San Francisco court are the result of the ongoing lawsuit they brought against him in Switzerland in 2020.

“To rationalize their blatant choice of forum shopping, the plaintiffs have concocted a riveting new story portraying Egorov as an evil villain who deceived three naive venture capital firms into relinquishing ‘trade secrets’ (such as the names of well-known investors) and $1 million of investment funds (which Swiss Stake immediately offered to return),” Egorov’s lawyers said in a lawsuit filed last month, following a series of lawsuits submitted to the California Superior Court in October.

“This unfortunate story – which the plaintiffs inexplicably failed to mention in three years of Swiss litigation – is purely fictional. It is nothing more than a clever narrative concocted to salvage the plaintiffs’ flailing Swiss litigation, but is undone by the very records the plaintiffs themselves cite,” they said.

According to the lawsuit, Egorov was employed in the US by NuCypher, where he designed the concept for Curve and developed a small prototype.

In order to expand Curve, he needed VC investment and introduced his ideas to three VCs.

“The plaintiffs are all users of the Curve platform, and they decided to invest in Swiss Stake GmbH because they saw a unique and potential profit opportunity that can help develop a very successful automated market maker,” the lawsuit filed by the three VCs claims.

“Egorov needs funding. He needs the legitimacy provided by California DeFi Risk Fund to launch his project,” the three venture capital firms claim in the documents.

The VCs claim that Egorov made false statements about how their investment in Swiss Stake GmbH, a company holding a Curve license, would be deployed.

The documents claim that Egorov convinced the three venture capital firms to believe that their investment would be used to hire developers, lawyers, and other staff. However, the three venture capital firms stated in the lawsuit that Egorov did not intend to give up control of Curve.

The lawsuit further alleges that Egorov justified “significantly shifting [control of Curve] power to himself” by locking in more CRV tokens than he intended.

They claim that Egorov did not hand over power to Curve DAO, but sold enough CRV tokens to make a profit while maintaining absolute control.

The lawsuit states, “Egorov gained enormous wealth from his fraudulent conduct. As he deposited the plaintiffs’ investments into Curve’s liquidity pool, Egorov received CRV tokens and fees as an incentive for providing liquidity.”

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