The Financial Market Supervisory Authority (FINMA) shut down E-Coin last week saying the entity had accepted deposits without holding a banking license. Something you should not do in Switzerland. At the same time, FINMA launched bankruptcy proceedings against the individuals involved. FINMA labeled the E-Coins “Fake Cryptocurrency.”
FINMA reports that for over a year since 2016, the QUID PRO QUO Association had been issuing “E-Coins”, developed by the association itself. Working together with DIGITAL TRADING AG and Marcelco Group AG, the association gave interested parties access to an online platform on which E-Coins could be traded and transferred. Via this platform, these three legal entities accepted funds amounting to at least 4 million Swiss francs from hundreds users and operated virtual accounts for them in both legal tender and E-Coins.
FINMA has shuttered the company and has taken legal action including enforcement proceedings to protect creditors. FINMA says it has found that the three legal entities had seriously breached supervisory law by failing to obtain the required authorisation.
FINMA has liquidated the association and the two companies. Since the three legal entities are insolvent, FINMA has also launched bankruptcy liquidation proceedings against them. FINMA has been able to seize and block assets to the value of approximately two million Swiss francs. The final amount of liquidation proceeds will not be known until bankruptcy liquidation proceedings have been concluded and all relevant liabilities have been identified.
FINMA explains that unlike real cryptocurrencies, which are stored on distributed networks and use blockchain technology, E-Coins were completely under the providers’ control and stored locally on its servers. The providers had suggested that E-Coins would be 80% backed by tangible assets, but the actual percentage was significantly lower. Moreover, substantial tranches of E-Coins were issued without sufficient asset backing, leading to a progressive dilution of the E-Coin system to the detriment of investors.
FINMA added a warning about unscrupulous cryptocurrency providers and said it would intervene if regulations are breached
FINMA also stated it welcomes innovation but not unauthorized activities.
FINMA has also placed the following companies on its warning list due to suspicious activity in the same field:
- Suisse Finance GmbH in Liquidation
- Euro Solution GmbH
- Animax United LP.
