A court in Switzerland has ordered the closure of bitcoin mining startup Envion AG over concerns of poor corporate governance. The company raised $100 million in an initial coin offering (ICO) in January, but a succession of boardroom wrangles have led to a breakdown in its corporate structure, bringing operations to a halt.
Also read: Canadian Bitcoin Miner Fortress Blockchain Reports $1.16M Loss in Q3
Founding Partners Sue Each Other
Founding partners Michael Luckow and Matthias Woestmann have repeatedly gone to court to sue each other over allegations of subterfuge, which supposedly took place at the time of the ICO or immediately after, according to a Handelsblatt Global report on Nov. 28.
Among other things, Woestmann, who has since resigned as board chairman, “accused Luckow of manufacturing more coins than agreed on, so he engineered a capital increase that diluted Luckow’s share,” the paper alleged.
In the capital increase, Woestmann allegedly issued actual shares, rather than tokens, effectively diluting the 81 percent stake of Luckow and his partners to 31 percent.
Now, the cantonal court in Zug — Switzerland’s cryptocurrency haven — has ordered Envion to shut down, citing its lack of a functional board of directors and “the complete lack of any auditing function.” The company is to be liquidated, the court ruled.
The article quoted a Zurich-based lawyer, Urs Schenker, as saying that Envion would likely go under. Schenker said liquidation was “unavoidable” because the financial regulator appeared to have reached a decision to investigate the cryptocurrency miner.
The Lure of Riches
Envion raised about $100 million in an ICO that attracted 30,000 investors between December 2017 and January 2018, when the cryptocurrency gold rush was at its peak. Investors paid $1 for each token in the offer, lured by the promise of over 160 percent growth and Envion’s low-cost approach to mining, using renewable energy. Today, the token is worth just $0.05, reports say.
However, relations between the founders went sour after the ICO, with accusations of cheating, causing operations at the company to come to a standstill. Handelsblatt Global reports that both Luckow and Woestmann are now under investigation by regulators in Switzerland and Germany.
It turned out that Envion’s finances and operations were being run from Berlin by Luckow’s company, Trado, even though the startup was registered in Switzerland. “Woestmann continues to blame Luckow, accusing him of not providing information about the ICOs. Luckow says Woestmann always planned to push the firm into liquidation, but he will fight it and believes the original concept can still work,” the article said.
The Zug court ruling is not final, as either party can still appeal the decision. In the meantime, all that investors can do is wait and hope for the best, as failed ICOs have already cost investors billions of dollars in losses throughout the world.
What do you think about the counter lawsuits at Envion? Let us know in the comments section below.
Images courtesy of Shutterstock.
Express yourself freely at Bitcoin.com’s user forums. We don’t censor on political grounds. Check forum.Bitcoin.com.