A regulator has ruled that a crypto startup acted illegally when it collected $90m from 37,000 investors during an initial coin offering (ICO) last year.
The Swiss Financial Market Supervisory Authority – known as FINMA for short – said that Envion, a company that claimed to offer clean sources of energy for cryptocurrency mining units, didn’t have the licenses necessary to perform the ICO. As a result, it has described the fundraising initiative as a “serious violation” of the law.
FINMA has used the ruling to warn that initial coin offerings can fall under its scrutiny – telling crypto startups that they could be liquidated if they fall foul of the rules. While the regulator has said that blockchain technology “has innovative potential within and far beyond the financial markets,” it stressed that these companies need to be held to the same standards as those in the physical world.
Envion is facing bankruptcy proceedings as a result of the investigation, which began back in March 2018. The drama has seen prices of its EVN token tumble from highs of $1.06 at the start of last year to just $0.06 at the time of writing.
Efforts had been made by Envion’s executives to ensure that their vision of using hydroelectric and solar to power its portable mining units could get off the ground, but officials warned described a liquidation as an “unavoidable” prospect.
In the run-up to its ICO, it said its technology could reduce the cost of “transporting” electricity and ensure that excess levels of energy would not go to waste. Envion also claimed it had pioneered cooling systems for mining equipment that were more eco-friendly and energy conscious than the air conditioning units often used in the industry.
The levels of energy associated with mining have long been a concern for many in the crypto community, with research recently suggesting that it takes substantially more energy to generate $1 of Bitcoin than it does $1 of some precious metals.
A FINMA statement added:
“[We have] already repeatedly pointed out the risks associated with ICOs to investors. Specifically, FINMA warns about unclear provisions or overly optimistic promises made in the whitepapers or published by companies which are planning to conduct an ICO.”