"Embezzling" VC funds to buy luxury homes? Curve founder sued jointly by three major crypto VCs including ParaFi

Author: 0xmin, Deep Tide

The crypto world needs more judges. Following the SEC's lawsuit against Binance, crypto VCs have also begun their journey of litigation.

According to DL News, recently, three well-known crypto VCs, ParaFi, Framework Ventures, and 1kx, filed a lawsuit against Curve founder Michael Egorov for commercial fraud in San Francisco.

You may be familiar with this name. Recently, Michael Egorov and his wife Anna Egorov splurged $41 million to buy a mansion called Avon Court in Melbourne, setting the record for the highest single property transaction in Victoria this year. Last March, the Egorov couple also purchased an Italian-style mansion locally for $18.25 million.

The crypto bear market has not affected Michael Egorov's lavish spending, but the three VCs, ParaFi, Framework Ventures, and 1kx, claim that they invested $1 million in Curve and are now receiving no commercial returns.

First, let's understand who Michael Egorov is.

He is Russian and obtained a bachelor's degree in applied mathematics and physics from the Moscow Institute of Physics and Technology. He later moved to Australia, where he earned a PhD in physics from Swinburne University of Technology and then a postdoctoral degree in physics from Monash University.

In 2013, he was introduced to Bitcoin; in 2015, he left LinkedIn to start a business, co-founding the blockchain privacy project NuCypher and serving as CTO. In 2016, the project received seed funding from Y Combinator and later investments from well-known crypto VCs like Polychain.

During his time at NuCypher, inspired by MakerDAO, Egorov began developing Curve in the second half of 2019, and officially left NuCypher in June 2020. In June 2020, Michael Egorov left NuCypher, going all in on Curve.

To expand Curve, Michael Egorov needed VC investment, both for funding and for the legitimacy that comes from backing by well-known DeFi venture funds. Thus, Egorov approached the three VCs, ParaFi, Framework Ventures, and 1kx.

Ultimately, these three VCs chose to invest in Egorov's Swiss operating entity, Swiss Stake GmbH. Egorov stated at the time that their assets would be used to hire developers, lawyers, and other staff.

Now, the VCs claim in the lawsuit that Egorov has no intention of relinquishing control over Curve. He locked up more CRV, Curve's governance token, than expected, and did not hand over power to Curve DAO. Instead, he sold enough CRV tokens to make a profit while maintaining overwhelming control.

"Egorov profited from his fraudulent actions," the lawsuit states. "By depositing funds that belonged to the plaintiffs into Curve's liquidity pool, Egorov has received a large amount of CRV tokens and fees as rewards for providing liquidity."

Of course, the fundamental issue remains that the VCs did not receive the benefits they were entitled to. The venture capital firms claim they did not receive the promised equity in Swiss Stake, their nearly $1 million investment was never returned, and they never received the thousands of dollars worth of CRV they were entitled to.

Egorov has already sold tens of millions of dollars worth of CRV tokens, which the VCs believe rightfully belong to them. Additionally, the VCs stated that they also missed out on business opportunities to invest in Curve's competitors because of this.

We will continue to monitor how this develops!