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The ICO boom of 2017–2018 and its disputes

Scale and mechanics

An initial coin offering, or ICO, allowed a project team to collect funds from the public by issuing tokens on an existing blockchain, usually Ethereum, in exchange for bitcoin or ether. In the typical Swiss structure of 2017 the tokens were issued by a foundation, which received the proceeds and undertook to use them for the development of a protocol, while the developers often worked through a separate company that contracted with the foundation. According to figures reported in September 2017, ICOs worldwide had raised about 1.5 billion dollars in the first half of that year, of which about 375 million dollars, or a quarter, had gone to Swiss foundations. More than 500 million dollars had accumulated in Swiss foundations over the preceding years. The Zug law firm MME alone had assisted thirteen crypto foundations, with about ten more in preparation.1

FINMA responded to the wave of enquiries with guidelines published on 16 February 2018. They classified tokens according to their economic function into payment tokens, utility tokens and asset tokens and stated that each case had to be assessed on its merits. Anti-money laundering rules applied in particular to payment tokens, while the rules on securities applied to asset tokens and to utility tokens that also served as investments. The chief executive of FINMA, Mark Branson, summarised the approach with the remark that blockchain projects conducted analogously to regulated activities could not simply circumvent the tried and tested regulatory framework.2 The guidelines were widely read abroad, because few regulators had yet expressed a view. The three-part taxonomy soon became a common vocabulary for lawyers in many jurisdictions. Their details and the later legislative development are discussed in chapter J.I.

The Tezos case

The most prominent of the Swiss ICOs was that of Tezos. The project had been developed by the American couple Arthur and Kathleen Breitman, who used a foundation in Zug, established with the help of MME, to collect the proceeds. In July 2017 the sale raised about 232 million dollars, after which the rise of the bitcoin price soon lifted the value of the foundation’s assets above 400 million dollars. The foundation was directed by Johann Gevers, with Diego Pons and Guido Schmitz-Krummacher as further board members. The founders themselves held no formal position in the foundation.3

In the autumn of 2017 a conflict broke out between the Breitmans and Gevers. The founders accused the foundation president of having misrepresented his compensation plans to the other board members and of seeking a bonus from the proceeds. They wanted to remove him and to gain more influence over the foundation, while Gevers insisted that the foundation had to act independently as required by Swiss law. The dispute delayed the launch of the network by about two months. In the United States, meanwhile, investors filed three class actions alleging that the sale had been an unregistered offering of securities.4

The Swiss foundation supervisor became involved when the board lost a member. After Schmitz-Krummacher had left in December 2017, the Federal Foundation Supervisory Authority required the foundation to restore its three-member board by the end of January 2018, failing which it would intervene directly. On 31 January 2018 the board unanimously appointed Lars Haussmann, a professional trustee with experience in corporate management and accounting, although the dispute about the alleged manipulation of bonuses remained open at that time.5 The American litigation ended in 2020 with a settlement of 25 million dollars, which the Tezos Foundation paid in full, although the Breitmans had also been defendants. After attorneys’ fees of 8.5 million dollars, the remaining 16.5 million dollars were distributed to investors who had suffered losses. The settlement left open whether the sale had in fact been an unregistered securities offering.6

The Tezos case became a textbook example for the governance of crypto foundations. It showed that a Swiss foundation, once established, belongs to no one: the founders of a project who are not board members lose control over the funds they raised, while the only external correction is the supervisory authority, which intervenes only where the law or the deed of foundation is violated. It also showed that a Swiss seat offers no protection against litigation in the jurisdictions where tokens were sold, since American investors could sue in American courts under American securities law.

Dfinity and other disputes

A second large project with a Swiss seat, the Dfinity Foundation in Zurich, experienced a different kind of dispute. Its Internet Computer network, with the token ICP, was launched in May 2021 and listed on large trading platforms. In its first month the price fell by about 90 per cent. On 22 July 2021 a Californian investor filed a class action in a state court in California, directed among others against the founder Dominic Williams and against the venture capital investors Polychain Capital and Andreessen Horowitz. The plaintiff alleged that the 469 million tokens released at the launch had been sold in violation of the Securities Act of 1933 and that insiders had received about a quarter of the supply.7 In March 2025 a federal judge in California dismissed a related action, mainly because the claims under the securities laws had been filed after the expiry of the statute of repose and because the fraud allegations against the founder were insufficiently substantiated, although the plaintiffs were given leave to amend.8

In Switzerland itself, the enforcement practice of FINMA drew the line between legitimate and illegitimate token issues. As early as 19 September 2017 FINMA had closed down the providers of a so-called E-Coin, the association Quid Pro Quo and two companies, which had accepted about four million francs from users. It placed them in liquidation, seized about two million francs and announced eleven further investigations into presumably unauthorised coin models.9 In March 2019 FINMA concluded that envion AG of Zug had accepted deposits from the public on a commercial basis without a banking licence when it raised more than 90 million francs from at least 37,000 investors through the issue of EVN tokens. Because of organisational deficiencies the Cantonal Court of Zug had already opened bankruptcy proceedings against the company, which was then liquidated under the control of the Zug bankruptcy office.10 The envion case became the reference for the proposition that a token which promises repayment can amount to a deposit under banking law, whatever its technical form.

Notes

  1. swissinfo.ch, “Crypto piggybank foundations proliferate in Zug”, 7 September 2017, https://www.swissinfo.ch/eng/business/500-million-business_crypto-piggybank-foundations-proliferate-in-zug/43494680. Examples mentioned include Tezos, Bancor and the Pillar Project. ↩
  2. FINMA, “FINMA publishes ICO guidelines”, media release, 16 February 2018, https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/. ↩
  3. finews.com, “Tezos Fights Over ICO Millions”, 19 October 2017, https://www.finews.com/news/english-news/29275-tezos-swiss-foundation-zug-battle-arthur-breitman-kathleen-breitman-johann-gevers-crypto-ico. ↩
  4. swissinfo.ch, “Gevers to play key role in settling Tezos dispute”, 29 November 2017, https://www.swissinfo.ch/eng/business/interested-parties_gevers-to-play-key-role-in-settling-tezos-dispute/43714278. The article quotes Professor Dominique Jakob of the University of Zurich on the traditional reluctance of the supervisory authority to intervene in foundations. ↩
  5. swissinfo.ch, “Tensions remain as Tezos Foundation replaces director”, 31 January 2018, https://www.swissinfo.ch/eng/business/career-trustee_tensions-remain-as-tezos-foundation-replaces-director/43867482. ↩
  6. CoinDesk, “Tezos Investors Win $25M Settlement in Court Case Over $230M ICO”, 1 September 2020, https://www.coindesk.com/policy/2020/09/01/tezos-investors-win-25m-settlement-in-court-case-over-230m-ico. ↩
  7. Decrypt, “Dfinity Faces Class-Action Lawsuit Claiming ICP Token Is Unregistered Security”, 22 July 2021, https://decrypt.co/76614/dfinity-hit-with-lawsuit-claiming-icp-unregistered-security. ↩
  8. CryptoNinjas, “California Court Dismisses Class-Action Lawsuit Against Dfinity: A Legal Victory with Open Questions”, March 2025, https://www.cryptoninjas.net/news/california-court-dismisses-class-action-lawsuit-against-dfinity-a-legal-victory-with-open-questions/. The report names Judge James Donato and the date of 27 March 2025. ↩
  9. FINMA, “FINMA closes down coin providers and issues warning about fake cryptocurrencies”, media release, 19 September 2017, https://www.finma.ch/en/news/2017/09/20170919-mm-coin-anbieter/. ↩
  10. FINMA, “FINMA ascertains illegal activity by envion AG”, media release, 27 March 2019, https://www.finma.ch/en/news/2019/03/20190327---mm---envion/. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.

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