ENVION LIQUIDATION: WHY EVN TOKENS REPRESENT REDEMPTION RIGHTS

Envion Liquidation - balance sheet and redemption payments

FinTelegram has regularly analysed the situation of ENVION AG in recent months. FinTelegram was presumably among the first to discuss a liquidation of ENVION AG as the best solution for ICO investors. This against the background of the ongoing legal disputes between the shareholders of ENVION around Michael LUCKOW on the one hand and Matthias WOESTMANN on the other hand. It quickly became obvious that there could be no positive going concern assumption  for the Envion concept. The following is a brief discussion on the legal position of EVN token owners in liquidation.

EVN Tokenholder and Liquidation

In view of the false prospectus and the misleading communication with the ICO investors via social media, the liquidation on ENVION AG via a court-appointed and thus objective liquidator is arguably one of the better alternatives.

Following the order for the liquidation of ENVION AG by the competent Cantonal Court in Switzerland, the question arises as to the legal qualification of EVN token owners vis-à-vis “ENVION in Liquidation”. Below is a tabular overview of our point of view:

Public Placement Participation Rights ENVION AG has publicly placed an unsecured subordinated profit participation right (the “loan”) in the maximum amount of USD 150 million in denominations of USD 1 represented by 150 million EVN tokens.
Currency applied
In accordance with the terms of the Subscription Agreement, the profit participation rights (“loan”) were issued and denominated in US dollars. So each EVN token represents a digitalized one US dollar certificate. Hence, the repayment of the loan has to be made in US dollars.
Clearing Currency While the loan is denominated in US dollars, repayment under the Subscription Agreement must be processed in Ether (ETH) in accordance with its provisions. This means for the repayment (redemption) of the loan that as many ETH have to be transferred to the EVN token holder as the conversion rate on the repayment date results from. According to the subscription agreement no obligation of the issuer shall be owed in FIAT Currency but in ETH.
Subscription & Redemption process Envion - Konvertierung von FIAT zu Krypto für Zeichnung und Rückzahlung
Debt Token Token The EVN token is to be qualified as a Debt  Token, which among other things represents a repayment claim against ENVION AG in the amount of USD 1 (“principal amount”) as well as the participation in the (then) expected and forecast profits of the crypto mining of ENVION AG (“Profit Participation”).
Token Certificate Each EVN token represents a fraction of the loan amounting to USD 1. The EVN token is a Smart Contract produced, blockchain interchangeable, and publicly traded certificate for the granted loan.
Creditor The EVN token owners are subordinated creditors of ENVION AG via their respective “token certificates”. They have to file their claims with the Swiss bankruptcy court in the proper way.
Redemption Payment The respective EVN tokenholders as creditors are entitled to the repayment of the principal amount of USD 1 per token. Payment is to be made in ETHs based on the conversion rate USD/ETH at the time the repayment.
Shareholder Rights EVN tokenholders have no shareholder rights. The Tokens do not convey any right in a liquidation surplus but are entitled to receive redemption (see above).

Repayment Claim Of All Tokenholders

However, it should also be noted that of the 150 million tokens issued in total, only 83% or 124,500,000 tokens were publicly placed with ICO investors. The rest was awarded to the issuer without any consideration, the founders, and to a bounty program:

  • 10% to founders of the issuer,
  • 5% to the issuer,
  • 2% to the bounty program.

That said, it’s evident that the proceeds from the disposition of ENVION’s asset are be paid pro rata to all 150 Mio issued and outstanding tokens (if done in line with the papers).

Damage Claims

However, it should also be noted that the founders around Michael LUCKOW and Matthias WOESTMANN are responsible for the false prospectus, misleading statements, and actions which may justify claims for damages by ICO investors.

Important Disclaimer

This contribution does not constitute a legal recommendation or a legal opinion on the liquidation of ENVION. In this article FinTelegram expresses the view of the editorial staff and its legal advisors. The purpose of this article is a public discussion guided by FinTelegram. The complexity of the ENVION case will inevitably result in the legal representatives of the different parties having different legal views. Investors or creditors of ENVION AG in liquidation should seek legal advice before taking any steps.