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Filecoin is one of the blockchain world’s most highly anticipated projects, promising to decentralize data storage.

Yes, but: Behind the scenes, an investor revolt has helped delay the big unveil and sparked a legal mediation over who owns what.

Why it matters: This is a messy byproduct of the 2017–2018 initial coin offering boom, in which dueling cap tables were a feature, not a bug.

Background: Protocol Labs, the parent company of Filecoin, was founded in 2014 and participated in Y Combinator.

  • It later raised a couple seed rounds, including from BlueYard Capital, Digital Currency Group, Union Square Ventures, and Winklevoss Capital. These investments were explicitly for equity in the parent company, without any promise of tokens in the Filecoin project.
  • In 2017, Filecoin raised just over $205 million via token sales, including through what at the time was the largest-ever ICO. Some, but not all, of the same investors participated.

The intrigue: Protocol Labs retained a percentage of the tokens, which in theory would be value accruing to the equity investors.

  • But multiple sources say that a large percentage of those tokens had been unilaterally distributed by CEO Juan Batiz-Benet to himself and early employees for less than a penny each, and that he has continued to make such distributions in the years since.
  • Sources also say that no tokens were distributed to shareholders and that it often was difficult to get questions answered.
  • Investors requested anonymity in speaking with Axios, due to the ongoing mediation.

What they’re saying: “I don’t think Juan was being malicious, and he genuinely wants to make this thing a success, but he was young and naive,” one investor says.

  • Another investor adds: “This is something that you’d think could have been worked out without lawyers, but there was a whole lot of ill-will built up.”

What’s happening: Mediation began within the past week, and appears to be mostly resolved with the equity investors to receive Filecoin tokens (albeit not as many as they wanted). It’s not clear if all investors have yet signed off on the proposed resolution.

  • “Obviously it could fail and become worthless. But if it works it could be huge, like Google-scale huge, which is why this became so contentious,” a different investor explains.
  • Protocol Labs, via a spokesperson, declined to comment.

The bottom line: Filecoin is now expected to launch its main network in about a month, so long as this legal dispute has been resolved.

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