Original author: Jiang Haibo, PANews

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"Fei Team Faces Collective Lawsuit, Unexpectedly Seeing Court Account in Discord"

The birth and demise of Fei Protocol were full of legends. It raised approximately $1.3 billion in funding during the genesis phase (March 31, 2021, to April 3, 2021) from well-known VCs such as a16z, Coinbase Ventures, and Framework. However, it temporarily halted its burning and reward mechanisms upon launch and suffered a hack on the Fuse pool deployed on Rari Capital on April 30, 2022. As a result, the DAO was eventually disbanded, allowing holders of the stablecoin FEI and governance token TRIBE to redeem their assets.

We thought that the story of Fei Protocol would end there. However, on July 9th, crypto KOL Julian Traversa tweeted that Fei Protocol's Discord had been taken over by the United States District Court for the Northern District of California, claiming that this was the first time he had seen a court take over Discord.

Discord Issues Compensation Reminder

Upon investigation by PANews, Fei Protocol's official Discord indeed contains relevant legal reminders.

In September 2022, after the governance of TIP-121, FEI can be redeemed for DAI at a 1:1 ratio, and TRIBE can be redeemed for the underlying assets in PCV (Protocol Controlled Value). The remaining functionalities of Fei Protocol are mostly suspended, and there are almost no official updates. On April 9th this year, Joey, the founder of Fei Protocol, set the project's Discord channel to "read-only archive mode".

On July 8th, Discord user "ClassAlert" announced on the official Fei Protocol Discord that users who purchased FEI or TRIBE tokens in the "Genesis Event" can participate in the settlement process and receive compensation. In legal documents, "class alert" may be used to notify specific individuals about ongoing or decided litigation events. In this case, "class" typically refers to a group of people in a class action lawsuit.

Almost simultaneously, FeiLabs also confirmed the legitimacy of the above message in an announcement on Discord, and attached a link to the class action lawsuit published by the official account.

Defendants agree to pay a settlement fund of $17.85 million

According to the "FEI TRIBE Securities Settlement" document of the San Francisco Superior Court, the court is currently reviewing a securities class action lawsuit. Plaintiff Jonathan Shomroni (Managing Partner of Oporto Group) represents himself and the participants in the Fei Protocol Genesis Event, filing a class action lawsuit against defendants Fei Labs and three early team members Joseph Santoro, Sebastian Delgado, and Brianna Montgomery in the Superior Court of California, San Francisco.

The plaintiff alleges that the defendant failed to comply with the registration requirements of the Securities Act of 1933 in the sale of FEI and TRIBE tokens during the Fei Protocol Genesis event. The defendant is responsible for the individuals who directly purchased FEI and TRIBE tokens from the Fei Protocol during the Genesis event, and participants have the right to recover their funds and interest. If they sold the tokens at a specific price, they have the right to recover their invested funds plus interest or compensation for losses.

Now, the defendant has agreed to pay a settlement fund of $17.85 million, which will be distributed to individuals or entities who participated in the Genesis event and submit valid claims, after deducting expenses, costs, taxes, and other items as ordered by the court. If the existing settlement agreement is not accepted, participants in the Genesis event can also protect their rights through other means.

If users wish to preserve their right to sue or continue to sue the defendant, they must opt out of the settlement and will not be able to receive a settlement compensation in the class action. In this case, users must send a written request to the claims administrator by mail or email before September 6th.

If there is an objection to the allocation plan, the requested fees and expense awards by the plaintiff's attorneys, objection to the settlement can also be made. The objection statement must be submitted to the claims administrator by October 1st.

Calculation Method for Claims

According to the Securities Act, purchasers of unregistered securities have the right to recover the difference between the amount paid and the value obtained from the sale, which only applies to those who suffered a loss during the process.

Under the current plan, the ETH paid for participating in the Genesis event will be uniformly calculated based on the price of $2009.19 at that time, and participants received FEI and TRIBE tokens in the Genesis event.

If the FEI and TRIBE tokens are sold before January 27, 2023, the value will be calculated in US dollars based on the CoinMarketCap closing price on the day of the sale.

If you still hold after January 27th, FEI will be calculated at $1, and TRIBE will be calculated at $0.25.

Since the program locks the participating ETH at the dollar value of the Genesis event, according to the participation rules, every $1 of ETH can get 1 FEI and additional TRIBE token rewards. Therefore, participants who sell FEI when FEI is equal to $1 will not receive compensation. That is to say, only participants who panic sell FEI during the unpegging period and participants who choose to convert FEI to TRIBE in advance may receive compensation.

Claim process and considerations

If you agree to the settlement of the class action, participants must submit a claim proof by October 1st of this year.

First, participants need to enter their wallet address on this page for verification.

After the verification is passed, connect your wallet and sign to display the historical FEI and TRIBE transaction records of the address. At the same time, users can also choose to add records in the exchange.

Then fill in the claimant's information, choose a payment method, and proceed with authentication and signature. Note that there is no option to pay with cryptocurrency in the payment methods.

After completing all the content, we still need to wait for the final settlement hearing on October 27th. If the claimed value is higher or lower than the compensation value in the settlement fund, the compensation ratio will be correspondingly reduced or increased.

Summary

Fei Labs and three team members became defendants in a collective lawsuit for issuing unregistered securities in the Genesis event. In the settlement plan, the defendants agreed to pay a settlement fund of $17.85 million. However, only users who have suffered actual losses (the value of ETH paid is less than the sum of FEI and TRIBE sold) are eligible for compensation.