The ICO gold rush of 2017 has been something to behold. In a year defined more by market calm than anything else, newly minted cryptocurrencies have become the only real pocket of coke-fueled speculative lunacy, pulling in more cash ($3.3 billion at last count) than early-stage venture-backed startups.

Investors shoveled hundreds of millions of dollars into digital tokens that, for instance, “do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features” associated with them.

Things have slowed down a bit since ICOs peaked in September, which saw $800 million in tokens sold. That probably had something to do with the SEC’s repeated reminders that hey, guys, these things look a whole lot like securities. Most recently the SEC cautioned celebrities (Floyd Mayweather, Jamie Foxx, Paris Hilton, etc) against repping coin sales.

But if anything’s going to pull the rug out from under the ICO party, it’s going to be this:

A class-action lawsuit has been filed in a California state court against the organizers of the technology project Tezos, which in July raised $232 million in one of the largest “initial coin offerings” (ICOs) ever. The lawsuit, filed on Oct. 25 in the California Superior Court in San Francisco, alleges that Tezos’ organizers violated U.S. securities laws and defrauded participants in the online fundraiser.

The largest single coin sale when it debuted in July, Tezos promised a “secure, future-proof smart contract system” with a “built-in consensus mechanism” and a bunch of other techy doodads that essentially promised a better and more efficient blockchain system than bitcoin and ethereum currently offer.

The ICO came with a stamp of approval from VC guy Tim Draper, who promised it would “improve the world.

”But before it got down to changing the world, however, Tezos had a few other things to take care of.

Namely, resolving a fiery legal dispute between the husband-and-wife millennial co-founders and the president of the Swiss-domiciled foundation charged with actually running the company and distributing the tokens to investors.

The founders accused the foundation president of “self-dealing, self-promotion and conflicts of interest.” In response, the foundation head accused the founders of “attempted character assassination” and “attempting an illegal coup.

” So much for consensus mechanisms.Throughout all of this, investors have patiently waited for tokens that have never come. So a few of them are suing. Tezos denies it defrauded anyone. And there’s this:

…participants were told they were making a donation and may never receive any.

If only traditional capital markets worked this way! Sorry our blood tester/juice squeezer didn’t function as promised, but you gotta understand you were only making a voluntary gift to our cause.

Thanks again!ICO investors have reason to be wary. If the class-action moves forward it could result in a court deciding that legally speaking, ICOs are securities offerings and should be subject to the galaxy of regulations pertaining thereto.

That’s a long cry from the ICO status quo, which basically consists of issuing a white paper and then doing whatever the fuck you want.

If the latter step turns instead into do-whatever-the-fuck-the-SEC-wants, it’s hard to see the ICO market maintaining anything remotely like the pace it has established this year.

Discover even more financial stories on Dealbreaker here: https://dealbreaker.com/2017/11/if-the-ico-party-comes-to-an-end-at-least-we-know-who-to-blame/