A federal judge has given preliminary sign-off to what appears to be a first-of-its-kind class action settlement involving an initial coin offering.

U.S. District Judge Richard Seeborg of the Northern District of California indicated during a hearing Thursday afternoon that he was granting preliminary approval to a $25 million proposed deal that the Tezos Foundation reached last month to settle claims brought on behalf of investors who claimed that the initial coin offering on the Tezos blockchain violated U.S. securities laws. Seeborg said during the hearing held via a Zoom videoconference that the settlement met the general parameters of "fair, reasonable and adequate" to move forward toward final approval.

"I do think my initial read certainly is that it is a solid settlement and one that I think we'll be able to proceed forward with," said Seeborg, noting that he would follow up with a written order. "This is new terrain in this litigation, so that is also something to take into account," the judge said.

Lead plaintiffs counsel at HGT Law and Block & Leviton filed court papers in March detailing the proposed deal to settle the class action brought on behalf of investors who claimed they lost money in the July 2017 ICO. The presale of so-called XTZ tokens offered on the Tezos blockchain raised the equivalent of $232 million in Bitcoin and Ethereum before the project was bogged down in delays and infighting at the Swiss foundation formed to promote it.

Block & Leviton's Jeff Block said during Thursday's hearing that although the claims administrator hired to reach out to the class estimated that about 7,500 members of the estimated 30,000-plus class would file claims, he thinks that notice will reach the entire class via emails on file with the Tezos Foundation, and that the claims rate could be higher. Block said that the $25 million settlement was better than the average 10% return that plaintiffs get on securities claims and that one factor motivating the deal was that the question of whether the XTZ offering qualified as a security under U.S. law was "very much uncertain."

Seeborg concurred saying that the parties did have much guidance about where he would land on the question of whether the tokens were securities, little guidance from the circuits, and no case on point from the U.S. Supreme Court on the issue.

Seeborg, who noted that the hearing was his first videoconference on a civil matter during the COVID-19 pandemic, said that he would set the final approval hearing for a Thursday in the latter half of August.

"I much prefer my grand courtroom but we have to adjust," said Seeborg, adding that he hoped the parties could meet in person next time.