Suspected fraud at envion AG: CEO Matthias Woestmann presents results of forensic investigation
The suspected major incidence of unauthorized transactions that overshadowed envion AG’s initial coin offering (ICO) between 15 Dec 2017 and 15 Jan 2018 has been confirmed in a forensic investigation by Canada’s Blockchain Intelligence Group (BIG), acting on behalf of the company.
The envion ICO between December 2017 and January 2018 was considered one of the most successful crowdfunding campaigns of recent years, with subscriptions exceeding all expectations. As many as 86 million tokens, each with a face value of $1 were placed worldwide.
The technical execution of the envion-ICO was entrusted to Trado GmbH under the direction of Michael Luckow.
However at the end of February 2018, envion CEO Matthias Woestmann revealed suspicions that, in addition to the tokens placed in the offering, around 40 million further tokens had been generated without authorisation by envion’s board, 20 million of which were not included in the prospectus. Some of these digital securities were then sold to Crypto exchanges.
German business newspaperHandelsblatt reported the affair on 28 May, under the headline “Crypto start-up Envion seeks vanished millions”.
The results of an extensive technical analysis of the ICO by experts from the Canadian
Blockchain Intelligence Group on behalf of envion AG have now become available, following an examination of publicly available data on the Ethereum Blockchain.
The BIG investigation has revealed that, probably in the final phase of the ICO, the smart contract function deliverTokens (…) served as a portal through which the suspected perpetrators conducted a major manipulation of data.
The BIG Report claims that “Creators and individuals administering the contract misused this function, creating large amounts (77.2 million) of tokens”.
This unspecified mass production of tokens started on 15 January shortly before midnight, in the final minutes of the ICO. Prior to that, 35.3 million token for bitcoin and credit card customers had been generated in compliance with the rules and sent to the designated virtual wallet BTC_CC.
Eight minutes later (at 11:41:02 GMT), the same address tokenVendor used the blockchain function deliverTokens (…) to create another 20.5 million tokens sending them to the wallet STORAGE. Another 6.3 million tokens were then sent to COMPANY, 2.3 million to ADVISOR and 12.6 million to FOUNDER.
FOUNDER is also the name of those at Trado GmbH responsible for all public announcements and press releases.
By 11:51:29 GMT, a total of 127 million tokens had been generated. The wallet STORAGE (which received more than 40 million tokens) was not granted an allocation in the prospectus of envion-ICO nor was it approved by the board of envion AG.
The second phase of the BIG investigation focused on the recipients of the envion tokens: investors, supporters, FOUNDER and other unknown persons.
At present, the BIG specialists, who also conduct work for the US Treasury and Department of Homeland Security, are looking closely at token recipients and seeking ways of identifying the suspects. Under data protection rules, this information will be handed over to the authorities and not made publicly available.
Further potential clues to the identity of the perpetrators could emerge from recognizable patterns of behaviour. When large quantities of tokens were sent to the Crypto exchanges IDEX, Token Store and EtherDelta for resale, the transfer was made in units of 100,000 tokens. The pattern is similar to the procedure for transmission to the crypto exchange HitBTC, made in tranches of one million tokens each. All transfers to HitBTC were triggered by the same address: 0xa12431d0b9db640034b0cdfceef9cce161e62be4
Another possible sign of co-ordination by the perpetrators comes from the fact that all the addresses, from which a large amount of envion tokens was distributed in each case, were active for the same timespan, namely 40 days.
The BIG report comprises a first step in clarifying the circumstances surrounding the envion ICO. As transactions on the blockchain are fully traceable, envion AG is confident that it can rapidly provide transparency and achieve resolution for all of the investors involved.
About Blockchain Intelligence Group (BIG):
BIG Blockchain Intelligence Group Inc. (BIG) brings security and accountability to the new era of cryptocurrency. BIG has developed from the ground up a Blockchain-agnostic search and analytics engine, QLUETM, enabling RegTech, Law Enforcement and Government Agencies to visually trace, track and monitor cryptocurrency transactions at a forensic level. Our commercial product, BitRank VerifiedTM, offers a “risk score” for Bitcoin wallets, enabling RegTech, banks, ATMs, exchanges, and retailers to meet traditional regulatory/compliance requirements. Our Forensic Services Division brings our team of investigative experts into action for investigations that require in-depth expertise and experience, either in conjunction with or supplemental to our user-friendly search, risk-scoring and data analytics tools.