Swiss financial market watchdog Finma has liquidated three entities that were providing a fake cryptocurrency called E-Coin.
Since 2016, the association Quid Pro Quo was issuing E-Coins it had developed itself. The association traded and transferred the fake virtual coins online with the help of Digital Trading AG and Marcelco AG. Through that online platform, the three entities are said to have gathered at least CHF4m from several hundred users.
“This activity is similar to the deposit-taking business of a bank and is illegal unless the company in question holds the relevant financial market licence,” stated Finma.
The three legal entities being insolvent, the Swiss regulator has also launched bankruptcy liquidation proceedings against them. It has been able to seize and block assets to the value of around CHF2m.
“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,” explained the Swiss financial watchdog.
Another company Suisse Finance GmbH is being liquidated due to suspicious activity in the cryptocurrency field and two others (Euro Solution GmbH and Animax United LP) have been placed on Finma’s warining list.
Moreover, Finma’s crackdown could be further extended as it is currently conducting 11 investigations into other presumably unauthorised business models relating to such coins.