Investors in crypto firms are turning cautious of taking board seats, report says

When companies which issue crypto-tokens face legal challenges, a class action lawsuit initiated by a number of other investors can hurt board members

October 11, 2022 09:00 am | Updated 10:16 am IST

A file photo of coins representing the cryptocurrency Bitcoin

A file photo of coins representing the cryptocurrency Bitcoin | Photo Credit: REUTERS

Investors of token-issuing firms are being advised against taking a board seat at the startup, according to a report by  The Information. Their lawyers have advised the executives to stay away from such roles as regulatory scrutiny intensifies.

(For insights on emerging themes at the intersection of technology, business and policy, subscribe to our tech newsletter Today’s Cache.)

The TerraUSD stablecoin collapse in May, and the Celsius lending platform’s withdrawals freeze a few months ago have put the crypto sector under regulators’ scanner. Authorities are also tracking institutional investors who have backed some of the failed or controversial projects.

Venture capital firm Andreessen Horowitz, which has several multi-billion dollar funds dedicated to crypto investments, was not looking to take up a board position in some of its high-profile crypto investments, the report said. The reason: To reduce the firm’s risk of legal liability.

Token-issuing firms also face legal challenges and risks, including class action suits. This could potentially lead investors and board members to a legal quagmire.

To limit liability, lawyers are advising investors to simply serve as observers rather than active board members, the report said.

Regulators worldwide are watchful of the effects of crypto on legacy financial systems. In September, the Biden administration released a framework for potential crypto regulation in the U.S.

A report by the blockchain analytics firm Elliptic stated that at least $4 billion in illegal crypto assets had been laundered by cyber criminals or dubious traders.

Top News Today


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.