Envion Case – Swiss Regulator FINMA Ascertains ICO Illegal Activity

Spread financial intelligence

In July 2018, the Swiss Financial Market Supervisory Authority FINMA initiated enforcement proceedings against Envion and its Initial Coin Offering (ICO). The investigation was completed in March 2019. According to the respective FINMA press release, it was established that Envion had received unauthorized public deposits of more than CHF 90 million from at least 37,000 investors in its ICO concluded at the beginning of 2018 without the required authorization under financial market law. Of the investors who are now worried about their money, around a third are said to come from Switzerland. In summary, it can be stated that Envion acted illegally.

Illegal Initial Coin Offering

According to FINMA, the terms and conditions of the token issuance would not have been the same for all investors in the first place. In fact, the ICO prospectuses did not meet the statutory minimum requirements and the statutory auditors were missing.

Furthermore, the acceptance of US dollars, as well as the cryptocurrencies Ethereum and Bitcoin, would have been permitted only as licensed banks, Finma continues.

In the present case, this acceptance of US dollars and the Ethereum and Bitcoin cryptocurrencies therefore amounted to an acceptance of public deposits for the purposes of the Banking Act. This however requires a banking licence.

FINMA press release (March 27, 2019)

Once upon a time, in the hype times of crypto and ICO, the Envion ICO was regarded as a role model for the industry. It was branded as “Made in Germany” and, additionally, conducted in Switzerland. What else could an investor demand, right? Well, it turned out to be one of the worst ICOs contributing significantly to the bad reputation of crypto. The Envion people did not act honestly in the first place. False and misleading public statements, missing disclosures, and intentionally hidden beneficial owners are just some of the points to be mentioned in this context. And, of course, the misappropriation of ICO funds by the Envion people and founders.

The Envion Set-Up for ICO
The Envion ICO Set-Up

The Legal Advisors Are To Blame

Surprisingly, Envion’s Board of Directors is discharged from the FINMA report, as Envion and former Envion CEO and co-founder Matthias Woestmann wrote in a reaction yesterday. Woestmann went on to say that the Board of Directors had relied on the advice of law firms when accepting public contributions, particularly with regard to the correct preparation of the issue documents. There was, therefore, no misappropriation of assets. A strange statement you can’t follow.

As is well known, the two founding teams, Michael Luckow and Trado GmbH on the one hand and Matthias Woestmann and his Quadrat Capital GmbH on the other, have started to argue during the successful ICO. This has resulted in the company’s collapse and ultimately in the liquidation of Envion AG. While the founders kept the millions from the ICO for their own private purpose and to retain their lawyers, the ICO investors still have to fear for their money. FinTelegram has published an overview of the ongoing court proceedings at the end of 2018 here.

Yes, The Funds Have Been Misappropriated.

FinTelegram has been working on the Cause Envion for a year now. In addition, a campaign was launched via the European Funds Recovery Initiative (EFRI) to compensate the participating Envion investors. FinTelegram is therefore very familiar with the situation and takes the liberty of stating that the Envion investors’ funds were, of course, misappropriated:

  • On the one hand, the founders around Michael Luckow and his Trado GmbH have retained millions from the ICO;
  • These millions that do not belong to Trado GmbH or Michael Luckow, but to Envion AG in liquidation and thus have to be redistributed to the ICO investors;
  • The power of disposal over the ICO Wallets was demonstrably vested in Michael Luckow and his Trado GmbH, who as an unauthorized person was thus able to dispose of the ICO funds;
  • The fact that the existence of Trado GmbH and Michael Luckow was concealed in the prospectus supports FINMA’s findings that Envion worked with illegal methods.

In FinTelegram’s view, this raises not only the civil law claims of the investors but also the question of the criminal consequences for the board of directors of Envion AG and the persons acting on behalf of Trado GmbH. Both parties have clearly committed civil, regulatory and criminal offenses in the context of the ICO.

Martin Laurent, the press & social media guy of Martin Luckow quickly figured out that FINMA was wrong in its findings. This guy never stopped to fool investors and perhaps well never do. He is actually one of the main actors in this Envion fraud case:

Martin Laurent’s comment on the FINMA findings

As a matter of fact, the prospectus was not worth the time reading. It was a sort pixie dust document with the intention to fool ICO investors and get their funds. These guys have not even managed to name the real founders and ultimate beneficial owners which violate laws and regulatory frameworks in most jurisdiction (AML).

In view of the apparently deliberate approach, the guilt of the legal advisors involved, as mentioned by Woestmann, must be questioned. If one assumes that the true beneficial ownership and other significant fact have been concealed from them, it is difficult to blame them now.

The Envion is and remains a crypto thriller that will keep the courts busy for some time to come.

Leave a Reply

Your email address will not be published. Required fields are marked *