The US Financial Industry Regulatory Authority (FINRA) has suspended Tezos co-founder Arthur Breitman from associating with broker-dealers for two years and fined him $20,000. The regulator’s decision is part of a settlement to resolve charges that Breitman made false statements about his outside business activities while being employed at Morgan Stanley (NYSE:MS). He has neither admit nor denied the accusations.
According to FINRA rules, registered securities professionals have to provide prior written notice to their employer before engaging in outside business operations if there is “reasonable expectation of compensation.” The FINRA’s settlement agreement says Breitman did not notify Morgan Stanley at any time about his side venture.
In October 2017, Reuters published the findings of an investigation demonstrating that Breitman, who is registered with FINRA, had not disclosed any outside business activities while being employed at Morgan Stanley from 2014 to 2015. This was the period when he was focused on creating the Tezos project. Tezos carried out one of the largest initial coin offerings (ICOs) in 2017 by raising $232 million in July but failed as a project because of internal disagreements.
Breitman filled two Morgan Stanley compliance questionnaires during that period and falsely stated he had disclosed all of his outside projects.
Sarah Lightdale, an attorney for Breitman, commented on FINRA’s decision as follows:
“The settlement with FINRA is unrelated to and has no impact on the launch of the Tezos network. Arthur cooperated fully with FINRA at all times and Arthur is pleased to put this personal matter behind him.”
In June 2017, Breitman’s spouse Kathleen, also co-founder of Tezos, said in an interview for Reuters:
“We made all the proper disclosures. It was a hobby, you know. And like there was never any intention to really commercialize any of the software.”
However, the hobby claim is invalidated by the fact that Breitman was behind a “Tezos Business Plan” in 2015 as a CEO and expected the venture to be valued from $2 billion to $20 billion should it manage to continue for 15 years.
Moreover, in early 2015, he reportedly told an acquaintance via email that he was looking to develop a business around Tezos but didn’t want to be publicly related to it. Breitman published two Tezos papers under the pseudonym “L. M. Goodman.”
It seems that Breitman was aware of the illegality of his actions. In some of the email messages sent to people close to him, he expressed worries that his Tezos business might conflict with his position at the Wall Street bank.
In November last year, Tezos was hit with a class action lawsuit in California for selling unregistered securities and defrauding investors.
This article appeared first on Cryptovest
