Espresso Systems Accused of IP Theft in Litigation Brew

When a company loses its leader, months or years of turbulence are often the natural result. This is especially true when the leader was a visionary in the tech space.

The example of Steve Jobs readily comes to mind, but there are many businesses at the leading edge of discovery in the digital world that have been thoroughly transformed when a CEO, board president or key manager leaves for another position, retires or passes away.

Ongoing litigation in the U.S. District Court of the Northern District of California provides an extreme version of the aftermath of such a leadership change. The story begins with the death of Temujin Labs founder John Powers in July of 2020. Temujin is credited with innovations in zero knowledge proofs (ZKP), DeFi and other blockchain technologies.

Temujin filed suit in November of last year against some of its former executives, alleging that in the wake of Powers’ passing the execs used intellectual property from Temujin to start a rival company. Causes of action listed in the civil suit accuse the defendants of trade secret misappropriation and misuse, trade libel, intentional interference with business contracts, civil conspiracy, and unfair competition.

The former executives called their new company Translucence Research Inc., later branding it Espresso Systems. Although the suit names eight former Temujin executives and employees, its allegations focus in large part on three: Ben Fisch, Charles Lu, and Benedikt Bünz.

Referring to this trio, the suit claims: “This is a case of predatory and predaceous corporate behavior, motivated by naked and objectionable greed of Lu, Fisch and Bünz, via depraved and unscrupulous methods, and loomed on the backdrop of misogyny.”

Former Temujin systems engineer Nathan McCarty and cryptography engineers Philippe Camacho Cortina, Fernando Krell, Binyi Chen and Luoyuan (Alex) Xiong are also named in the suit.

The civil complaint states: “Plaintiffs are informed and believe, and based thereon allege, after the untimely death of Temujin’s co-founder John Powers in July 2020, the individual Defendants Lu, Fisch and Bünz hatched a plan to steal and transfer intellectual property created, owned, licensed by or otherwise belonging to Temujin Delaware to an entity that they would later own and control, which turned out to be Defendant Translucence Research, Inc. (“Translucence”). In connection with that plan, they took advantage of their executive offices in Temujin Delaware, and the prestige and authority associated with them, and conspired among themselves and with others to destroy the credibility of the surviving co-founders, defame the very technology they were hired to create, unlawfully open source highly sensitive Temujin codes, stir fear and foster mistrust among rank-and-file.

“After shaking Temujin Delaware to the core, Lu, Fisch and Bünz quit Temujin and incorporated Defendant Translucence the next day. Thereafter, Defendant Translucence together with the individual Defendants Lu, Fisch and Bünz have continued to conspire and scheme together in conjunction with the other individual Defendants McCarty, Krell, Camacho, Chen, and Xiong, and others, to further obstruct, disrupt and interfere with Plaintiffs’ business …”

The suit claims as many as 20 other former Temujin employees may have aided the alleged scheme, which purportedly involved transferring trade secrets, arranging financing for Espresso Systems, disparaging Temujin’s reputation and attempting to interfere with key economic relationships.

The complaint also alleges that one defendant sabotaged developmental data during the company’s testnet for Amazon Web Service and later demanded $5 million from the company in return for not spreading incendiary rumors. Events described in the complaint range from seemingly minor incidents such as throwing a water bottle at a colleague to extremely serious charges, such as attempting to open-source Temujin’s proprietary source code and allegedly defaming company principals as spies, drug dealers and human traffickers.

In all, these actions represented a “conspiracy” to destroy Temujin, the suit claims. Plaintiffs are seeking unspecified compensatory and punitive damages, declaratory relief and injunctive relief.