Switzerland : FINMA shuts down fake cryptocurrency providers

8 years ago - Published in Finance, Fintech Land, Technical Analysis

FINMA, Switzerland’s Financial Market Supervisory Authority, has shut down a cryptocurrency racket as part of its latest efforts to tackle digital currency fraud. Per its latest edict, FINMA’s victim was a fake cryptocurrency provider. It is at the same time pursuing as many as twelve other cases amidst an uptick of fraud in the country.

The action came less than a week after China unveiled its own harsh measures. In addition to a blanket ban on ICOs, China-based cryptocurrency exchanges must stop trading and notify users of their closure by month’s end.

According to a Reuters report, QUID PRO QUO Association had been operating in Switzerland for over a year, and managed to accrue funds of over CHF 4.0 million ($4.2 million). FINMA uncovered a scheme in which the group had been providing e-coins to several hundred users, operating as a blatant scam.

FINMA said it has also taken action to bankrupt the accused parties, through legal proceedings.

"Generally, regarding Swiss regulation in the area of fintech/cryptocurrency, I can state that FINMA as supervisory authority applies the currently applicable financial market regulation and intervenes if regulations are breached," a spokesman for FINMA said in an emailed statement.

The regulator said that E-Coins bore no similarity to cryptocurrencies. Whereas virtual coins such as bitcoin and Ethereum are stored on distributed ledgers (blockchains), the counterfeit tokens were stored via local servers.

Investors were deceived into believing the digital cash would be 80 percent backed up by tangible assets.

"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," the watchdog said in a press release.

FINMA has said it is investigating 11 other suspected activities related to fake cryptocoins. The Swiss authority suggested investors visit its website to protect themselves from such hoaxes.