The Swiss Financial Market Supervisory Authority (FINMA) has recently taken action against the perpetrators of a crypto-scam. The firms in question were distributing a fake cryptocurrency and acting without proper licensing. A dozen other possible fraud cases are under scrutiny from the watchdog too.
In a statement earlier today, FINMA announced that they have taken action against the QUID PRO QUO Association. The companies involved had been providing “E-Coins” for over a year and it’s estimated that they had amassed more than $4.2 million from many users. Of these funds, FINMA has said they were able to recover around half. They commented on the legality of the firms:
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 license.
In addition, it was found that the operation had failed to back the E-Coins with tangible assets, something which the company’s forming the QUID PRO QUO Associated had promised to do. This led FINMA to seize some CHF2 million and launch bankruptcy proceedings against the firms.
These three legal entities accepted funds amounting to at least four million Swiss Francs from several hundred users.
Alarm bells should have been ringing earlier for those who were duped by QUID PRO QUO. After their investigation, FINMA reported that E-Coin was not like “real cryptocurrencies”. Apparently, it was completely centralized on local servers, rather than being stored on a distributed blockchain ledger. Unfortunately, hyped markets don’t always produce the most rational investor behavior, and as such many were duped by the scam.
For FINMA, the crackdown against QUID PRO QUO is the first of a total of twelve similar investigations in Switzerland. The country, and in particular the small municipality of Zug, has become something of a hotbed for crypto companies, particularly after the recent crackdown on secretive practices taking place in the nation’s hugely successful banking sector. Drawn by favorable tax rates, many legitimate startups now call Switzerland home. However, with the explosive growth of the industry in recent years, many scams and infringements of law (purposeful and accidental) have gone unnoticed. Roger Darin, the Community Manager at Bitcoin Association Switzerland spoke to a local publication:
I am very glad these ponzi schemes and outright scams have shown up on Finma’s radar. There is a lot happening in Switzerland’s crypto asset space, and just as the Street Parade attracts pickpockets every year, scammers use the excitement to trick unsuspecting newcomers.
Around the world, regulators and traditional banks are beginning to voice concerns about the use of cryptocurrencies. With the SEC in the US regulating ICOs as securities, China outright banning them altogether, and now Switzerland policing scams in their own crypto industry, it appears that the wild west days of cryptocurrency may finally be drawing to a close. Whilst many Bitcoin puritans loath the idea of government regulation, many others admit that it is something vital for the wider adoption necessary to drive the space’s market cap skyward in the future. A more stable, policed climate is crucial before more traditional investors are willing to enter the market.
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