Canton Zug wants to establish itself as a global cryptocurrency hub. This ambition can be thwarted, because counterfeiting is taking place all over the world with virtual currencies. There are several lawsuits pending in the US worth over $850 million fraudulently. It comes to the Bitfinex trading platform, and the path leads to Zug.
This content was published on July 08, 2019 – 15:00
Colin Emile and Francois Billet, Gotham City *
On April 24, 2019, New York City attorney Letitia James filed a case against cryptocurrency exchange Bitfinex. Its suspicions: Bitfinex is hiding an $850 million hole from its customers.
Bitfinex is one of the few trading platforms that allows investing in the Tether cryptocurrency. The idea behind this cryptocurrency: It is said to be pegged to the dollar because it has a reserve of real dollars equal to the amount of rope issued.
And this is apparently where the dog was buried: according to the indictment, $850 million is said to have disappeared from this reserve managed by Bitfinex. Suspicions focus on Panama-based company Crypto Capital, which has been entrusted with managing dollar payments. It seems that the latter stopped this activity in 2018.
The Bitfinex has now been ordered by the New York judiciaryexternal linkTo reveal all records related to Crypto Capital’s money transfers.
However, Crypto Capital’s structure is surprisingly opaque. on your website external linkThe company only mentions an address in Zug and claims to belong to the Swiss company Global Trade Solutions AG. annoying Commercial registration external linkThis company, formerly known as Semacon AG Software Engineering, changed its name in 2016. It was located first at the address of the Zug law firm Goldblum & Partners, and then at the trust company STAX AG, on Zug’s Bahnhofstrasse.
At the center of the suspicions is an American citizen
On the trail of the alleged missing money, she meets Reginald Fowler. The American businessman, who is known for his involvement in the football world, was remanded in custody in the United States in April 2019 on charges of fraud.
The charges against Fowler bear striking similarities to the Bitfinex case. In particular, Fowler was accused of setting up an “illegal cryptocurrency exchange service bank.” In 2018 he was said to have embezzled $850 million from this.
The court froze the funds held in five bank accounts with HSBC in the US. It is in the name of Reginald Fowler and Global Trading Solutions LLC. This name bears a striking similarity to Zug’s Global Trade Solutions AG. Another strange coincidence: according to the Swiss Trade Register, Reginald Fowler also heads Zug Spiral Global Trade Solutions AG.
According to US authorities, Reginald Fowler could still have obtained several million dollars from the alleged fraud. It appears that this money is currently hidden in about 60 offshore accounts. The indictment also indicated the presence of other participants whose identities have not yet been known: they are from Canada, Israel and Switzerland.
Late reaction from the Swiss authorities
In Switzerland, the Swiss Financial Market Supervisory Authority (FINMA) took more than a month to respond to information from the New York attorney general’s office. On May 27, 2019, Global Trade Solutions AG put on Black listexternal link.
Such a blacklisting occurs when “FINMA’s investigations show that the service provider is exposing investors to immediate and significant risks.” Spiral Global Trade Solutions AG was not subject to the same procedure: the latter could legally continue to operate and would continue to be managed by Reginald Fowler.
When asked, FINMA declined to comment. The Swiss Federal Prosecutor’s Office states that in this context it “has not initiated any criminal proceedings at the moment”.
In addition to Global Trade Solutions AG, three other cryptocurrency companies were blacklisted between May 27-29: Currency roomsexternal linkAnd the Crypto de Swissexternal link And the Labo PC Ltdexternal link. However, there is no evidence that these companies are linked to the Bitfinex case.
An alarming case for the Zug Crypto Valley
This fraud case comes at a time when Switzerland is trying to position itself as a reference for virtual currencies around the world, particularly across the Zug Crypto Valley. This was expressed, for example, in a report published by the daily Les Echos from February 2019. Its headline is “How Switzerland wants to become a crypto country.” It reports on the federal government’s ambition to specialize in the cryptocurrency industry in order to “find growth drivers for the future — beyond wealth management for the wealthy.”
The canton of Zug offers companies operating in this field a very attractive tax rate of about 12%. Facebook also recently announced that it intends to launch its Libra cryptocurrency through a Swiss foundation.
* Gotham Cityexternal link Founded by investigative journalists Marie Morris and François Billet, it is a white-collar crime newsletter.
It reports to its subscribers every week on fraud, corruption and money laundering related to the Swiss financial centre, based on publicly accessible court documents.
Every month, Gotham City selects and adds one of its articles and offers swissinfo.ch readers free access.
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