Fact check: Will Envion founders really donate millions to the crypto community?

This article has originally been published on Envion Watchdog on Oct 6, 2019, and is republished on FinTelegram with the respective permission

What is going on with the scandalous Envion ICO that collected funds in the millions? Envion raised USD 100m during an initial coin offering (ICO) back in December 2017 and the ICO then tanked in a big scandal after clashes between the shareholders. An unparallel comedy in the Crypto world that is still ongoing. Almost two years later the liquidation is in full swing. Investors and token holders will soon be able to file claims with the liquidator in Switzerland.

But then, out of nowhere, on 30th September 2019 came a press release from NAÏMA, the PR agency used by the founders. It contains an offer to investors to join a program where they can earn extra money.

The program, called LUP (Liquidation Upgrade Program), initiated by the founders, has all the marks of a suspicious offer: You will get a lot of money and it is all free.

“No risk. Only benefits. Just sign here! Sign the Power of Attorney and we take care of your vote at an upcoming creditors meeting”

Envion founders’ promise to investors

Yahtzee. Jackpot.

We say SCAM ALERT. Watch out and use your common sense!

Many investors in the community are amazed by the recklessness of such an offer. The harm done to more than 30,000 investors is not forgotten and the ICO is considered an unprecedented fraud. But you can always top a SCAM by doing another SCAM. You just have to dare.

Let us recollect the facts:

1. We have one pot containing (our) Envion funds. This is the money left from the ICO and it is still in the banks.
2. Envion besides has outstanding funds withheld by the founders (we heard, the founders confirmed that at the last court hearing in Berlin), namely ETH and BTC in the millions not transferred to Envion.
3. The Swiss Financial Market Supervisory Authority “FINMA” confirmed the illegal business of Envion.
4. the FINMA ruling has led to the liquidation of Envion AG, where the court in Zug appointed the liquidator Pablo Duc to make sure investor interests are protected

Everyone wants this saga to end, as quickly and as simply as possible, via an official call by the liquidator to file claims and to finally get refunded. This so-called “Call to Creditors” is expected to take place on 28th October 2019. Interestingly, in his official announcement the liquidator was forced to address the LUP program. This remark is unusual and very revealing.

So, instead of joining the quick and easy way offered by the official Swiss bodies, the founders want to take a detour. For them, the game should have a different ending: bringing all Envion tokens to the table, regardless of whether they are owned by investors or just made out of thin air: namely founder tokens and company tokens. It is believed that the founders also want claims to be dismissed (claims by Envion against Trado) at the creditors meeting.

Claims like prospectus liability, the large tranche of funds still withheld by Trado, the mining container(s) with hardware inside and so on. The founders argue that they only want to break even, claiming invoices in the millions from Envion. The invoices are questionable and ought to be the subject of a deeper inspection by the liquidator. But, with enough voting power, all of this can be glossed over and waved through. No more founder liability.

This is the reason why they want to get the POA from the investors.

Plan B to get hands on the big pot

Let’s dissect this a bit more. What has exactly happened?

The LUP program was first mentioned on a German crypto-related website: www.cryptoticker.io The owner of the website is Dennis Weidner, a guy who was involved in the Envion ICO business from the beginning. He brought in Pre-sale investors and allegedly he also helped with the selling of substantial numbers of company tokens, which was done behind the back of the investors. In his latest cryptoticker newsletter, published on Saturday, 28th of September 2019 he was the first to reveal the LUP program. Way before it was announced or mentioned by the founders or by Martin Laurent (spokesman of the founders) in the community or by any other press release. An official press article came out 2 days later. Just a small detail. But this perfectly demonstrates that Dennis Weidner has a direct connection with the founders. He never went public and never commented on this buddy connection. With his Envion involvement, he has surely made a mistake. Apparently, his own (crypto) businesses are suffering. He purchased himself a Tesla, so we believe he has somehow made his cut.

Once the article was out, it rapidly made its way around the community. The founders had no option other than to confirm the revelation. In fact, this program had not been created in the last days or weeks. The website was actually registered on 25th of April 2019. The limited company, PSGA Attain Consultants and Management GmbH, acting as the trustee, was created around the same time: 13th of June 2019. This coup was planned well ahead, around 5 months ago. It is obvious that the only purpose of the newly created company is the LUP program.

We believe the founders realized back then that the liquidator would have a different view on both the founder and company tokens and on the extra 20m token created as storage. The founders understood the risk that those tokens would not be considered as valid claims. That was the start of an alternative plan: LUP.

They found somebody, not connected with all the mess: A Germany based real estate financier: Peter Schott (the managing director of LUP). The question here is: Why choose a man like him and not a specialist law firm? This guy is as far from Swiss liquidation procedures as the moon is from the earth. Would you like to be represented by him in this highly complex liquidation case? Is this just another strawman game, like we saw with Cyrill Stäger, Matthias Woestmann and Envion itself (as a front for Michael Luckow’s Trado GmbH)?

Another strange detail: DWF, the German law firm advocating the whole Envion ICO, is on board and again looking after the legal framework. The first version of the “LUP Terms and Conditions” PDF contains the name of the author, Mathias Nörenberg. He is an employee at DWF Berlin.

Well, this fact by itself doesn’t prove much. Indeed so. But, after it was discovered by the community, the PDF file was altered. Overnight. The content was not changed, just the name of the author was purged. No DWF backlink anymore. This is, in our view, non-transparent and a conflict of interest.

Remember: DWF was constantly pushing the agenda, they have nothing to do with the prospectus or the subscription agreement of Envion. They made the same (PDF author glitch) mistake earlier: A PDF of the Envion subscription agreement contained the name of a DWF employee. We covered this in an earlier article.

With Power of attorney (PoA) to new horizons

Let’s talk about the PoA.

What can be expected, if you sign this PoA? Why such a complicated plan with an alternative website, creating a separate company, appointing a trustee and skilled lawyers?

Well, the story could run like this:

1. In order to gain anything from their free founder tokens (plus potential cheap market tokens), they would need to be able to challenge the decisions of the liquidator, who is an extremely experienced and qualified lawyer with a good track record in finding fair and amicable liquidation outcomes. But hey, from the founder’s perspective, everyone is always wrong: The Cantonal Court, FINMA, the Liquidator. By the way, has anything ever come out of “Founders are challenging the bankruptcy” or “Founders are fighting the FINMA report”?
2. The only way to carry out that challenge would be to get a quorum of voters (min 25% of registered investors — note: individual investors, not tokens!) at the first creditor meeting. They would then try to use a 50%+ majority in that meeting to vote for a creditor committee of their liking (which would take over the liquidator’s duty). This creditor committee can then amend the rules for the liquidation, e.g. the formula for the settlement of claims.
3. In order to do that, they need to collect as many votes as possible. They do it via the PoA.
4. Because no one will just give them PoA, they come up with a nice story. “Upgrade Program”, “Free Profits”, a bit of scaremongering (“if you don’t sign, creditors’ interests are not considered”, “if you don’t sign, the process will take a long time and nothing will be left”, “If you don’t sign, money go to the others”) etc.. This, plus a nice “profit calculator”, and some promises based on yet another lawsuit that the founders are announcing, creates enough FUD for clueless investors to sign up.

If this all goes to plan, millions of tokens that the liquidator most likely will NOT accept in the liquidation (or, will not result in any profits to founders) will now be accepted, at a $1/Token value. This amount OF COURSE reduces the available money for distribution because it would otherwise go to the other, legit creditors pro rata.

The only genuine reason and motivation we could see here is that there is (in theory) a chance that any leftover money would go to the shareholders (Founders, Matthias Woestmann, Thomas van Aubel). But this would only happen if insufficient investors claimed back their money, leaving money on the table for the shareholders.

BUT — if the founders are genuinely worried that this scenario might come true, AND they believe that they have a chance to win damages from MW and TvA, reversing the capital increase etc., they would eventually own the vast majority of the money that would otherwise, in this scenario, be distributed to MW and TvA. They could easily just distribute this money to the token holders. No need to interfere with a clean and fair liquidation process.

(source: this interpretation was published on telegram by some chat member)

Connecting the dots

The above scenario sounds highly realistic, don’t you think? The marketing has already started. Sponsored ads on Facebook, press releases by NAÏMA and our beloved Martin Laurent (as community manager) are again effective tools to carry out the mission.

Meanwhile, Michael Luckow (Trado GmbH) comes along with more smoke screens (see screenshot). Nobody can give a better explanation about HIS real intentions than he does here.

Well, Mr. Luckow has a long-standing reputation problem. Even before Envion. His track record was revealed multiple times in the community. He still has to fix legal cases: civil lawsuits, criminal lawsuits, and liabilities towards Envion. With the power of enough investors behind him, he can dismiss some of these minefields. But he needs your vote. He is promising USD 25m “added funds”. Whatever that means! LUP is promising USD 5m to the investors as a charitable donation (before your taxes) taken from the founder token pool, if they get refunded. But first Trado is taking their chunk to break even, as it was committed by Michael Luckow.

Regarding the other USD 20m, it is unclear how it gets collected. The claim of squeezing USD 20m out of MW and TvA is far from reality and not really a serious attempt to convince anyone. But of course it is a colorful marketing trick. Like the founders did with the Envion ICO: “We will build 606 MMU and we pay 161% ROI annually.”

Beside, you may have noticed the discrepancy in the use of currencies: Euro or USD?

We want to point out the immediate dangers of you signing a PoA. A PoA is a contract, but the trustee can use your vote for whatever he thinks is right, whatever he wants, in front of the liquidator and this is binding and cannot be reversed. Read more about the implications in a comment by an investor in the community: https://t.me/envioninvestors/29251

By the way, you can always revoke a signed PoA document, effective immediately.

The creditors meeting

The liquidator is legally the representative of the creditors. The meeting needs a 25% quorum, either present or via PoA. 25% of investors who have either filed a claim or (if they have not filed) come to the meeting and get accepted by the liquidation panel.

If there are less than 25% present or PoA’d, there will be no 2nd meeting, and the liquidator decides on the process (simplified). If the quorum is reached, there can be a 2nd meeting, and the plan of the liquidator can be changed via a simple majority. By controlling the quorum, the founders can take control of the entire liquidation process. The consequences have been explained above.

This is not easier nor faster, it instead complicates the whole liquidation. With potential lawsuits initiated by the founders this could take even years.

Nation’s pride versus greed of man

Switzerland is known for her independence and innovations. Switzerland is doing things with precision and absolute reliability. We believe in the work the liquidator is doing. He has a great track record and will always stick to the law. Therefore we should trust him. Nobody else. But with PoA and LUP the founders are trying to get into the driver’s seat. For their own, obvious, reasons.

We investors got fooled once, we should not allow ourselves to get fooled again.

We have reason to believe that the Swiss government, FINMA, and the liquidator will monitor the situation very closely. Our understanding is they will not permit more harm to the Swiss Blockchain landscape. The Envion disaster was enough to harm.

Dear Switzerland, don’t put your reputation on the line again!