Let’s talk about Investors Protection, please
Much has already been written about the complicated ENVION case. Given the current situation, it seems that ENVION could develop into a role model and a case study for “how to develop a valid investors protection approach” in the crypto-investment space. From our point of view, investors protection has not been mentioned too often in the ongoing discussion which is focused primarily on the shareholder battle. But, as a matter of fact, ENVION raised money from more than 30,000 people worldwide. Currently, these investors are the victims of a shareholder battle. Due to the lack of and incorrect information in the white paper, ICO investors had no way of recognizing that there were several shareholder groups in the Envion that could get into conflict.
In the meantime, these investors started to join forces and along with an investors’ telegram channel, the website www.envion-investors.org went online. This seems a valid approach and from our point of view the only reasonable way to make the rights of the EVN token investors heard in this mess. As telegram channels are used heavily in selling tokens worldwide, we think it is more than adequate that the same social media channels are used to organize the disappointed investors.
EVN token holders will find it difficult to assert their rights anyway. From our point of view, token holders should also be seen as investors who must be protected.
The Envion Battlefields
For the purpose of an efficient discussion in this complicated ENVION case we should try to structure the topics to discuss and identify the individual battlefields. In our view, these two battlefields are
- the Shareholder Dispute Battlefield, i.e. the dispute between the two founder teams
- the Investors Protection Battlefield, i.e. the legal claims of the ICO investors/ EVN token-holders
Currently, it looks as if the people around the ENVION AG CEO Matthias WOESTMANN are the bad actors on the “Shareholder Dispute Battlefield“. Apparently, they have a respective track record and are experienced corporate raiders. WOESTMANN and his partners may have tricked the founders around TRADO GmbH and Michael LUCKOW. Actually, it’s up to the courts to decide on that in the weeks, months, or years to come. It’s a battle between the two shareholder groups.
At the “Investors Claims Battlefield“, however, we see both shareholder groups in a joint liability against ENVION ICO investors and EVN token-holders.
Evidently the prospectus – the legal basis for their investment – contained false and misleading information. Probably the most important piece of misleading information in the prospectus was that the management of ENVION AG pretended that all assets necessary to reach the promised business goals are at the disposition (owned by) ENVION AG.
Now it is evident that neither the smart contract for the token sale nor the IP rights for the MMU ever have been at the disposition of the management of ENVION. ICO investors have been misled and lured into an empty shell. The investment prospectus was false as was the white paper and the public announcements across the different ENVION social media channels. All those different elements of public communication created a “false and misleading picture” for ICO investors/EVN token-holders.
At least, the evident advertising gag … we are a compliant ICO by issuing a prospectus … will result in an prospectus liability for the management team of ENVION AG. Moreover, however, everyone involved in the project is responsible for making false or misleading statements in public. With investors protection as the guiding principle, we see a legal responsibility of both founding teams here. Pointing at each other will not change anything for investors and the courts on the “Investors Protection Battlefield“.
What about the promised transparency?
ENVION wanted to be a different ICO, a transparent project and company. Sounded promising because investors protection starts with transparency in the first place. As Nathanial POPPER in his NYT article rightfully reminded us, it was one of ENVION’s key messages to potential investors to be different from those many other dodgy ICOs. In one of its many promotional posts on Medium, the Envion team wrote:
“As financial regulators across the globe look to regulate I.C.O.s and protect investors, Envion serves as a model for a compliant crowdsale that operates with the same transparency and integrity of traditional financial markets.”
Well, it, unfortunately, turned out that ENVION exactly was the opposite of a transparent project. The TRADO-founders around Michael LUCKOW initially hid in the dark and Matthias WOESTMANN, a former journalist and investment letter publisher, ran the show. Despite being labeled a compliant ICO “made in Germany” it turned out that the quality of ENVION’s public papers – white paper and prospectus – had the very same poor transparency level as many of the criticised offshore ICO scams.
In the course of the ICO, the ENVION team disclosed a lot of information to convince potential investors. Those pieces of information published on its website, on its Medium channel (followed by 4.8k people), in its white paper, and in the prospectus, turned out to be substantially wrong. Let’s try to establish a list of issues associated with ENVION’s public statements:
|Statement & Source||Claim||Fact|
)Sources: Press Release Oct 27, 2018, prospectus, White Paper)
|In an ENVION medium post dated Oct 27, 2017, they ask themselves the question "Who are the founders?" - and the answer was Jasper HELLMANN, Matthias WOESTMANN, and Felix KRUSENBAUM. Additionally, in the prospectus and in the white paper, KOCH, MARTH, and FUCHS have been mentioned as part of the team. No TRADO GmbH.||Micheal LUCKOW, never mentioned before the break-out of the shareholder battle, represents TRADO GmbH and the founder team. No background information provided.|
|Matthias WOESTMANN sparked ENVION in 2015 (Source: White Paper)||In the White Paper (History), WOESTMANN was presented as the one who sparked the ENVION idea and hence was part of the initial founder team already, definitely to be called a founder.||TRADO claims that its team and not WOESTMANN were the founders of ENVION (or the idea).|
|IP & Technology|
(Sources: prospectus, White Paper)
|In their ICO prospectus, it is stated that ENVION AG owns the MMU technology and can dispose of it. With all public announcements this impression was reinforced.||IP rights & MMU technology is owned by TRADO GmbH.|
|ENVION is in control of Smart Contract (Source: White Paper), Prospectus)||ENVION as legal issuer of EVN tokens gave the impression of having control over the Smart Contract. The founding team members MAHRT and FUCHS are mentioned in prospectus and white paper as the respective developers of the ENVION team.||ENVION as legal issuer for EVN tokens never had control over the Smart Contract. It's under control of TRADO GmbH.|
|ENVION Seed Funding|
Medium post Oct 27, 2017)
|In their October-2017 Medium Blog post it was mentioned that "Envion has already scored more than $1M from international investors within 4 weeks and founders have invested about $2M from their own funds in R&D to develop the technology. The question is, who are those investors, where have they invested in, and what's their position currently?||ENVION AG was not established back then and did not receive these funds. Hence, this information is false and misrepresented the issuers financial situation at the time of ICO.|
(Source: Medium post Feb 19, 2018)
|ENVION announced that "Envion’s first production line is ready for mass-production after weeks of testing and process refinement — and the results are as impressive as the concept." First MMU shipments were announced for Mid-March 2018: "mass-production starting in March, and we should scale up to over 600 MMUs by July". Hence, at least several dozens MMUs should be available today even if we assume that production had to be stopped Mid-May with the commencement of legal actions of the TRADO founders.||Up until today the production facilities have obviously not commenced mass-production.|
(Source: Medium post March 8, 2018)
|In an investors' update ENVION informs: "The founders have brought the conditions for mass production to the point where it’s possible to start full-scale production within 3 days. At present, the only thing required to begin is executive approval of the use of ICO funds for mass production and execution of the token subscription agreement." Actually, that's a 6 weeks delay. No word was spent on possible issues between the two founder teams which is irritating at best, or intentionally misleading in a more realistic perception.||see above|
|Founder Token Sale|
(Source: Telegram, Founders Blog)
|In the course of the battle between the two founder teams, it was said that the TRADO founder team sold EVN tokens to finance the production (we understood). As TRADO obviously is the owner of the technology AND the smart contract, it could have easily started with the production in the very best interest of the EVN tokenholders but, we assume, they will argue that this wasn't/isn't possible because of the legal cases filed with the courts. That again, is not in the very best interest of the EVN tokenholders and both parties are to be blamed for that.||MMU production has not yet been launched. Hence, it's questionable what the TRADO founders did with the proceeds of the sale of the locked EVN tokens.|
|Deals and Partnerships (Source: NYT article)||Chris Pfaff emailed news about deals with IBM and the ruler of Dubai||No deals with IBM or Dubai happened for whatever reason. The respective update came after closing of ICO|
Many people worked on the vehicle ENVION and everyone knew (or had to know) about the status and condition of the vehicle when the ICO was started. From an investor’s point of view, it is an unjustifiable simplification to blame the driver only, now that the vehicle crashed because of fatal construction problems.