When BitTorrent sold to the founder of controversial crypto startup Tron, it wasn’t just one of web 2.0’s earliest and most prestigious startups that changed hands.
It turns out, the peer-to-peer sharing company now owned by Tron founder Justin Sun also took a small stake in Chia Network, a soon-to-be-launched cryptocurrency protocol helmed by BitTorrent co-founder Bram Cohen, a fact that was not been previously disclosed by either firm.
According to documents obtained by CoinDesk, Sun submitted his winning acquisition offer to the BitTorrent Board on February 14. The next day, the board unanimously approved an agreement with Cohen granting a “full release” of some of its intellectual property (IP) in exchange for the right to make a $50,000 investment in the company under a Simple Agreement for Future Equity (SAFE).
As for what IP might have changed hands, and that might be helping to power the Chia network, both companies are now staying silent on the matter.
A spokesperson for Chia Network told CoinDesk:
“There has been no license or assignment of rights from BitTorrent to Bram [Cohen] or Chia. All software and related intellectual property rights used internally or distributed by Chia was either developed by Chia employees or contractors, licensed from third parties or was available in the public domain. Chia has committed to open source.”
Sources with knowledge of the deal said the two companies further entered into an agreement of “mutual releases and non-disparagement,” so that neither party would bring suit against the other due to events that happened prior to the investment.
All in all, it’s the latest information on Sun’s surprise acquisition of BitTorrent, first reported by Variety in June, and which subsequently prompted no shortage of dialogue and confusion in the industry.
In July, BitTorrent announced it would operate from Tron’s San Francisco offices.
Cohen’s role
While Cohen remained on BitTorrent’s board, he left to start Chia in late 2017.
According to the merger documents, Cohen still owned 31 percent of BitTorrent’s common stock at the time of the acquisition. Common stock holders received $29,343,986 of the $119 million sale. Each share of common stock was worth a base price per share (with various conditions) of roughly $0.81.
By the time of the sale, Cohen’s attention was primarily directed at the new venture.
Chia Network is a more eco-friendly way of securing a public blockchain, as CoinDesk previously reported in September. Miners on the network prove that a certain amount of disk space is available to the network. Validators on the network turn over unused disk space for Chia’s use, according to its FAQ.
In March, it announced a $3.395 million funding round led by Naval Ravikant, which also included Andreessen Horowitz, True Ventures, MetaStable, Greylock Partners, Danhua Capital and DCM.
DCM was also the leading shareholder in BitTorrent.
At that time, the company said it would do what’s known as a “mini-IPO” under the Security and Exchange Commission’s Reg A+. The round was promised in the second quarter, but it has not yet been publicly announced. Many of BitTorrent’s patentable inventions list Cohen as the inventor.
Google Patents lists six patents with Cohen as the inventor, the oldest being “End-system dynamic rate limiting of background traffic.” All of the patents he’s credited with still show up as assigned to BitTorrent.
Internal BitTorrent documents reveal that early on Sun wanted Cohen and other early staff to return, but removed that requirement as a stipulation of the deal.
BitTorrent did not reply to a request for comment by press time.
BitTorrent photo via CoinDesk archives