Fei team faced a class-action lawsuit, and never expected to see the court account on Discord one day.

Original Title: "Fei team faces collective lawsuit, never thought they could see court accounts in Discord"

Source: Planet Daily

What is Fei? What has happened recently?

Fei is a decentralized stablecoin project that was once popular, aiming to provide value anchored to the US dollar. Fei Protocol was launched in the spring of 2021 and was one of the few algorithmic stablecoins purely supported by cryptocurrencies at that time. The project introduced the concept of "protocol-controlled value", which means that the deep liquidity is owned and managed by the protocol and cannot be removed at any time, unlike other systems.

Recently, Fei Protocol announced a settlement proposal for a class action lawsuit. The San Francisco Superior Court personally announced on the Fei Protocol Discord channel that wallet users who participated in the Fei Protocol Genesis event can fill out a form to apply for settlement compensation, which is the first case in the industry in the cryptocurrency world.

Background: The Hacker Incident and Voting Disputes in 2022

Fei suffered several hacking attacks in 2022, which led to doubts in the community about the protocol and technical capabilities.

The most serious hacker attack directly led to the split of the Fei community. In 2022, the organization behind Fei, TribeDAO, merged with Rari Capital and suffered a re-entry attack, resulting in the theft of $80 million worth of cryptocurrency assets. After the theft, two completely different voices emerged, leading to community unrest and almost division, and the entire Fei Protocol gradually came to an end in this dispute.

So what are the two different sounds?

One proposal was to fully compensate the victims of the hack through the TRIBE token pool (Fei's governance token), which is a common practice for project teams after being attacked, effectively using project funds to offset the losses of relevant parties. However, this proposal was later rejected in the vote, mainly because the Fei team believed that the hackers primarily attacked the other party in the merger, Rari, and that TribeDAO was also a victim of the hack and should not be responsible for compensation, at least not fully. They supported another proposal that suggested stabilizing the FEI stablecoin against the US dollar and using the funds from 57 million TRIBE tokens to compensate the victims of the hack. This proposal is not a full compensation, and has been criticized by many. Some critics claim that the partial compensation proposal put forward by the Fei team retains most of the project's funds.

2023 Class Action Lawsuits

After the chaotic events in 2022, Fei Protocol and its three founders are facing a collective lawsuit this year, one of the most familiar reasons in the cryptocurrency industry: accusing Fei's tokens, FEI and TRIBE, of being unregistered securities.

On July 9th of this year, the San Francisco court took over the Discord server of Fei Protocol and issued an authorization notice, announcing a proposed settlement agreement that will pay individuals and entities who purchased FEI or TRIBE tokens during the Genesis Event a total of $17.85 million in damages.

According to court documents, the main reason for the violation was the sale of unregistered securities, and during a period of time, "FEI token failed to maintain its anchor price, and the lowest trading price dropped to $0.7128 per FEI. Investors quickly sought to exit their positions, but in doing so, they were punished by Fei Protocol's 'direct incentive' penalty. Anyone who tried to sell FEI during this period suffered losses. The TRIBE token also failed to maintain its value, falling more than 80% compared to the Genesis Event opening price." In short, the plaintiffs in the class action claim that Fei sold unregistered securities and caused them significant losses.

According to the settlement agreement, the Net Settlement Fund will be distributed proportionally to the collective members who submit claims after deducting attorney fees and court costs. The fund is expected to be worth $13 million and requires approval. Eligible individuals and entities can submit claim forms to receive a portion of the settlement amount, object, or choose to opt-out and preserve their right to bring a separate lawsuit against Fei Protocol.

The website provides four options for Genesis members.

Fei Protocol team denies any wrongdoing. However, the entire incident has raised concerns and uncertainties about the future development of Fei Protocol.

The court will hold a hearing in the future to consider whether to approve the settlement agreement. Odaily Star Daily will also keep an eye on the development of this event.

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