Swiss Watchdog Launches Proceedings Against $100 Million ICO

The Financial Market Supervisory Authority of Switzerland is taking action against a company called Envion AG, according to an official press release.

After conducting an investigation, FINMA has concluded that the company has breached financial market law in relation to its ICO.

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World’s most profitable

According to its website, Envion is the “World’s Most Profitable Standard of Self-Expanding Crypto Infrastructure”. Its tokens represent shares of ‘mobile mining units’ which are located in shipping containers “ready for “plug-and-play” deployment at any energy source.” It aims to pay power plants to use their surplus energy to mine cryptocurrency, and its “patented cooling system” makes it “40 times more efficient than traditional data centers.”

It sold EVN tokens, which are Ethereum-based, in an ICO that ran from the 15th of December 2017 to the 14th of January 2018. According to FINMA, it sold the tokens to more than 30,000 people and made approximately 100 million Swiss francs ($100.6 million).

According to the press release, FINMA suspects the sale to be unauthorised, but it has not yet revealed any more detail on the case.

A visitor to the Envion website should note that the word ‘profitable’ appears three times on the landing page alone, which does indeed seem suspicious.

The company’s white paper also begins with a legal disclaimer saying that it is not approved by FINMA or the American Securities and Exchange Commission, and then goes on to say: “The EVN token can be categorized as a security as it entitles token holders to receive the profits from mining operations.” It argues that because it does not market its tokens to US citizens, it is in compliance with US securities laws.

FINMA and cryptocurrency

FINMA was formed in June 2007 with the merging of the Switzerland’s Federal Office of Private Insurance, the Anti-Money Laundering Control Authority and the Swiss Federal Banking Commission – this last entity had been operational since 1934.

Examples of its recent activities include shutting down a scam called QUID PRO QUO Association which had made $4.2 million by selling a fake cryptocurrency, and issuing a warning against a fake self-regulatory association called IFCOMM which listed false membership details for well-known brokers.

Switzerland has been relatively progressive in its regulation of cryptocurrency, an approach typified in the city of Zug which has gained the reputation of being the Silicon Valley of that industry. The government also began investigating the possibility of launching a national cryptocurrency in May 2018.

In February 2018 FINMA published guidelines for ICOs, in which it committed to examining projects separately and classifying their tokens as payment, utility or asset. The first refers to tokens which are used solely as currencies, the second is applicable when the tokens provide access to a specific service, and the last is when tokens take the place of securities or other financial derivatives.

With the definitions settled, the regulator applies existing laws as appropriate to each case –  for example, in June 2018 it granted a licence to a startup called Crypto Finance AG.