Cryptocurrencies

ConsenSys Accused of Stealing Payment Startup’s Code for Rival Service

Joseph Lubin, ConsenSys founder, at CoinDesk's Consensus 2019 (CoinDesk archives)

An Ethereum-based payments project claims in a new lawsuit that ConsenSys abused its position of trust as an investor to access trade secrets and create a rival offering.

  • BlockCrushr filed a complaint Tuesday alleging ConsenSys misappropriated its intellectual property to create a rival version of its payments system that allows recurring transactions, such as monthly payments, on the Ethereum blockchain.
  • A ConsenSys spokesperson told CoinDesk they did not usually comment on ongoing legal proceedings but expressed “severe disappointment that such baseless claims are even being filed.”
  • Per the filing, ConsenSys Ventures invested $100,000 into BlockCrushr and invited the firm to participate in that year’s Tachyon Accelerator program.
  • As part of the agreement, BlockCrushr said it shared its intellectual property, including 120,000 lines of source code, to help ConsenSys guide and support it.
  • Between October 2018 and February 2019, BlockCrushr said, ConsenSys had requested over 20 meetings to talk in depth about the payments system.
  • BlockCrushr, which is based in Canada, shared information because it was promised further investment, the filing states.
  • The startup said Vincente Hernandez, a developer with Token Foundry, another ConsenSys project, was present at many meetings.
  • The complaint alleges Hernandez put some of BlockCrushr’s publicly available code in his own GitHub.
  • He is said to have became a founding member of Daisy Payments (now CodeFi), another recurring payment system, a few weeks later.
  • In February 2019, ConsenSys allegedly ceased communications with BlockCrushr and didn’t return its calls.
  • As ConsenSys was still an investor, BlockCrushr says it informed the company privately that its payments system would launch on Aug. 23, 2019.
  • On Aug. 22, ConsenSys launched Daisy Payments, which BlockCrushr claims is a near-identical offering to its own.
  • BlockCrushr claims it was forced to cancel its own launch as a result.
  • CodeFi is now used as the foundation for ConsenSys’ new staking service.
  • According to the filing, ConsenSys employees, including CEO Joe Lubin, said there was a firewall issue and that some of BlockCrushr’s proprietary information may have been used by other teams.
  • However, BlockCrushr said no action was taken and communications stopped soon after.
  • The startup is now formally accusing ConsenSys of two counts of misappropriating trade secrets and one count of a breach of contract, and is suing for damages.

See also: ConsenSys Muscles Into Compliance With New Regulatory Product for DeFi

UPDATE (July 17, 09:05 UTC): This article has been updated with comment from ConsenSys.

Related: Thailand Already Using Central Bank’s Digital Currency

Read the full filing below:

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