In a terse press release issued July 26, 2018, the Swiss Financial Market Supervisory Authority (“FINMA”) announced that it has launched enforcement proceedings against an ICO issuer based on evidence that the company may have “breached financial market law.” According to FINMA, the proceedings focus in particular on possible breaches of Swiss banking law resulting from the potentially unauthorized acceptance of public deposits. FINMA noted that, in the context of its ICO, the subject company “accepted funds amounting to approximately one hundred million francs from more than 30,000 investors in return for issuing EVN tokens in a bond-like form.”
Switzerland is one of several jurisdictions outside the United States that has offered a “light touch” regulatory approach to cryptocurrency and digital asset regulation in an effort to spur local economic development. But as this case demonstrates, “light touch” is not the same thing as “no touch,” and even offshore regulators’ patience for potential misconduct is not boundless.
On a related note, there continues to be a great deal of misinformation in the crypto marketplace about the ability to evade US jurisdiction by simply incorporating overseas. Irrespective of the jurisdiction of incorporation, an enterprise doing business in the United States, either by maintaining a physical presence here or by marketing to US customers or investors, will usually be subject to oversight by US authorities. Indeed, the US Securities and Exchange Commission (SEC) can theoretically assert jurisdiction anywhere in the world, and often does when a company engages in a cross-border securities offering. The SEC is particularly aggressive against bad actors when US investors—irrespective of whether they live stateside or abroad—are harmed.
Furthermore, persons incorporated offshore doing business in the United States can incur significant US tax and other liabilities depending on the nature and structure of their US operations. Likewise, without knowledgeable local advisors, US persons doing business in a foreign jurisdiction may unknowingly incur local tax liabilities or otherwise violate local laws.