Switzerland’s financial regulator brought charges against eight “initial coin offering” (ICO) blockchain projects for breaching anti-money laundering rules last year. ICOs raise money from the public by selling digital tokens that promise to hold future value for the consumer.
The fundraising activity is designed to make it easier for start-ups to raise capital, but it has also attracted a number of fraudulent operators. The Swiss Financial Market Supervisory Authority (FINMA) investigated 60 ICOs in 2019, according to its annual report.
More than ten violated anti-money laundering rules, leading to charges being laid against the people behind eight of these ICOs. Eight companies were placed on FINMA’s warning list of firms to be avoided by the public. Enforcement proceedings were later started against three of the companies.
FINMA counted 94 ICO operations starting up in Switzerland last year compared to 184 in 2018.
In its annual reportexternal link, FINMA also warned about a growing threat from fraudulent companies that offer to store, trade or invest cryptocurrencies on behalf of people.
“There is an increasing number of fraudulent websites relating to these services, which offer their customers supposed investments in cryptocurrencies, but do not use any money they receive for the proper purposes,” it states.
Last year, a criminal complaint was brought against one unnamed provider of token custody and trading services. Enforcement proceedings were opened into a firm that acted as a go-between for clients and cryptcurrency exchanges and another company suspected of illegally selling securities in the shape of digital tokens.
In some cases, companies were forced to pay back money that they had unlawfully obtained from the public.