The CEO of Layer1 Technologies Inc. sued its founder, claiming he’s trying to exploit corporate paralysis at its Swiss private equity parent to seize control of the Bitcoin mining company, loot it, and run it as his “own personal fiefdom.”
John Harney and DGF Investments Inc., an investment firm based in the British Virgin Islands, filed the lawsuit in Delaware’s Chancery Court against Jakov Dolic and his attorney Tobias Ebel, the third board member at San Francisco-based Layer1, which is incorporated in Delaware.
The suit, made public Feb. 3, claims Dolic and Ebel hatched a plot to usurp management of Layer1 and Switzerland’s Enigma Holding AG by filling a leadership void created when Enigma’s board abruptly resigned in response to their wrongdoing, setting off a potentially lengthy “interregnum.”
“Dolic and his loyalists” have “wielded their majority board control to ransack Layer1, operating it for their own benefit and engaging in self-dealing transactions with impunity,” according to the shareholder derivative suit. They’re “actively looting the company for their own profit,” the complaint says.
Dolic and Ebel couldn’t immediately be reached for comment Monday.
Engima, allegedly Layer1’s sole stockholder, is a holding company—owning cryptocurrency-related enterprises—about which little information is publicly available. Dolic led Enigma as recently as early 2021, according to a press release at the time, and DGF allegedly now holds a majority stake in it.
According to the complaint, Layer1 became an Enigma subsidiary in early 2022, when Dolic, Harney, and other company leaders—some no longer in the picture—exchanged their Layer1 shares for either Enigma stock or cash. Dolic allegedly used the transaction to cash out for more than $16 million.
But Dolic and Ebel now claim they’re “taking unspecified steps to unwind the merger,” something they have no authority to do more than seven months after it closed, and telling Layer1 employees that Dolic owns 77% of the Bitcoin miner, the suit says.
The move is “a canard designed to mislead Layer1 personnel into following Dolic’s directions,” according to the complaint. “Time is not on Layer1’s side,” the suit says. “Dolic and Ebel are already executing a scheme to wrest control of Layer1 and its assets from Enigma.”
The complaint was originally filed under seal Jan. 30.
Cause of Action: Breach of fiduciary duty; section 226 of the Delaware General Corporation Law.
Relief: An injunction, an accounting, costs, fees, and an order appointing a custodian to run the company.
Attorneys: Harney is represented by Blank Rome LLP. The investment firm is represented by Ross Aronstam & Moritz LLP and Kramer Levin Naftalis & Frankel LLP.
The case is Harney v. Dolic, Del. Ch., No. 2023-0101, complaint unsealed 2/3/23.
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