The Austrian cryptoming company Hydrominer announced Sunday evening in a mailing to its customers that until further notice payments of coins and tokens will be stopped. The reason given for this is that the business model of the company around CEO Nadine Damblon is currently being examined by the FMA as to whether it falls under the rules of an Alternative Investment Fund (AIFM).
What a brilliant marketing idea the ICO of HydroMiner was in autumn 2017. Cryptomining was just developing into a money-making machine when HydroMiner entered the market with the idea of ecologically compatible green mining in Austrian hydropower plants. Best Austrian hydropower at cheap prices instead of Chinese coal. Who wouldn’t want to invest in it?
Already the first attempt at a token sale of the start-up – led by Nadine and Nicole Dambon – both with an alleged expertise of many years in the cryptomining sector – led to legal discussions: In mid-September 2017, the FMA intervened in the first offer on the grounds of clear violations of the capital market. Then the ICO expert Oliver Völkl was brought on board and the concept of a utility token, the H20 token, was developed: in this model, every token holder is a creditor of the company and is entitled to payment of the proceeds from the mining capacity acquired in advance.
This token sale brought the company 8,600 Ether or 2.5 million euros at the time. Obviously, due to the excitement of establishing the legal entity, a legal formality had been forgotten according to attorney Oliver Völkl. He saw no liability problems for the managing directors from obligations, which accrued before the entry of the enterprise in the trade register.
In any case, the joy was great, but one saw a much greater potential and above all a huge demand for even more mining performance. That was at the time of the big hype in December 2017/January 2018.
And so the concept of a security token was conceived.
Actually, they wanted to go straight to the stock exchange with the concept “every share is a token”. Then it became a profit-participation model and people proudly spoke of Europe’s first security token. In spring 2018, a brochure was prepared for the H30 token and sent to the FMA for approval. At the same time, the team was massively expanded and the number of ICO Advisers increased to 15. In addition to the legal advisors, Arthur Stadler and Oliver Völkl, notorious ICO Advisers such as Phillip Nunn, Nikolay Shkilev and Vladimir Nikitin were engaged to address a global audience.
At the same time, the marketing services of Philip Dimitrov were purchased. Dimitrov had already marketed the ICO of the burst Cointed. Dimitrov was not afraid to manipulate ICO rating pages for Hydrominer. At the same time, a private placement for the H30 token has been carried out starting in the first months of 2018. Since then, the H30 token has been advertised diligently on the company’s Telegram Channel and it has been said that this will soon be sold and that the H20s can then also be converted into H30 tokens.
And then it came to a halt:
In mid-May 2018, the FMA informed the legal representative of Hydrominer that the H30 prospectus could not be approved in this form because, in its opinion and also in accordance with the FMA announcement of 22 May 2018, the business model in the prospectus submitted complies with the rules of an Alternative Investment Fund (AIFM) and therefore the relevant conditions had to be fulfilled and could not be approved. We also reported on the legal opinion of the FMA in May.
Hydrominer has been looking for a solution for its business model since the end of May 2018. On the website and in the social media, regardless of the legal opinion, there is still talk that only the approval of the prospectus would be pending before the planned token sale of the H30 token would start.
In the July issue of the ZVR Oliver Völkl publishes a critical article on the legal opinion of the FMA on the topic: Mining of virtual currencies as an alternative investment fund, without mentioning that it is de facto an article on a business where he has a stake in.
Status at the end of September 2018:
Hydrominer sends a message informing the customers and creditors of the company (H20 token) that the intended business model of the company could be covered by the AIFM regulation and therefore could not be implemented in order to further inform them that no more payments can be made on the H20 token:
“The Austrian Fiscal Authority (FMA) is currently evaluating HydroMiner’s cloud mining model as an Alternative Investment Fund (AIFM). According to the authorities, the current model, which involves pooling client funds on HydroMiner’s wallets and paying them out on demand, could possibly fall under the regulatory requirements of an alternative investment fund. If the authorities decide that HydroMiner should have applied for a license for an alternative investment fund, a fee will be levied with potentially high penalties which could lead to the closure of the company.
We will follow the legal advice here and have no choice but to freeze all mine payments immediately. This is a temporary measure to avoid a possible closure of the company.”
The truth and nothing but the truth
Why the old voucher model should suddenly also fall under the AIFM regulation is incomprehensible and incomprehensible.
Fintelegram poses another uncomfortable question: As we already reported with 21Coinworld, more and more cloud mining companies are discontinuing their payments. This cannot be explained by weak profitability alone, because small amounts could still be paid out.
On the Telegram Channel, the H20 token holders are still reassured by the fact that it will soon be possible to exchange the H20 token for the H30 token.
Postscript: In the meantime, the company has announced that it will soon resume payments according to Trending Topics. So what is it then?