A scandal that erupted at a newly-formed $100 million German cryptocurrency project has spilled across the border into Switzerland, threatening the reputation of the growing Swiss crypto scene.
The row bears some of the hallmarks of the recent Tezos scandal that brought unwanted global attention to the self-styled Crypto Valley in canton Zug. In this case the key actors are German and the dispute may end up in the Berlin courts. But the fact that the company was established in Baar last October does not bode well for the Swiss.
The Envion cryptocurrency mining project chose Switzerland to take advantage of a more favourable regulatory environment than that which exists in Germany or other parts of the world, the company’s CEO told swissinfo.ch.
Earlier this year, Envion raised $100 million (CHF100 million) from investors in an initial coin offering (ICO). The start-up aims to build mobile containers that are designed to be hooked up to renewable energy sources to mint cryptocurrencies.
But problems between the company’s founders and Envion’s CEO, former German television journalist Matthias Woestmann, started shortly after the ICO was completed. Both sides accuse the other of fraudulent activity, leaving investors wondering whether the cryptotokens they purchased will be worth anything in future.
The founding team, led by Michael Luckow, accuse Woestmann of illegally wresting control of Envion through a covert capital increase that diluted their holding from 81% to 33%. He is then said to have transferred a majority of shares to his lawyer. The founders have complained to the Berlin courts about this manoeuvre.
Speaking to swissinfo.ch, Woestmann did not deny the allegation, but said it was justified after he spotted an alleged irregularity in the issuance of tokens from the ICO. A press release issued by Envion stated that the founders issued 40 million extra tokens without the knowledge of the company’s board.
“Several million tokens have already been resold through various crypto exchanges, profits went to unknown actors. Based on the tokens’ nominal value, the loss amounts to $40 million,” the statement reads.
This has been reported to both the Berlin authorities and the Swiss Financial Market Supervisory Authority (FINMA). The Swiss regulator said it does not comment on ongoing matters.
A legal representative of the Berlin-based founders told swissinfo.ch that Woestmann had been aware of the extra coins for some time and had even ignored requests by the founders to destroy them.
The impasse has resulted in the seemingly impossible situation of Envion holding the ICO funds with the founders possessing the intellectual property rights to the technology behind the project. Investors are being told that the tokens they bought in the ICO may well end up being invalidated with a fresh batch being minted to replace them.
The value of the existing tokens, which were sold at a notional value of $1 each, has crashed according to coinmarketcap.
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