Envion liquidation — The Trail of Money and the missing Millions

A Story of Kidnapped Crypto, Ballooned Bills, and the LUP Laundromat

note: this story was first published on 30th of June 2020

Latest announcement by the Liquidator

Today (2020–06–30), we finally heard from the liquidator after a long period of silence. In an official statement (link) sent to investors in the failed Crypto business Envion AG (now in liquidation), he reported on the progress of proceedings and the status of assets and liabilities.

On the website envion-konkurs.ch you can find the official statement in the form of a PDF document. There are German and English versions. This document is password protected; use the password 4yE?okd=%F to get access.

In a nutshell, the Envion liquidator has made it quite clear which way the wind is blowing: it is a warning shot to the founders, to LUP and to Michael Luckow that they will not get away with trying to profit from the liquidation. The most important points are:

  • Trado withheld crypto valued at around USD 10.9 million without justification, and the liquidator will try to get it back (if needed, via the courts)
  • The Envion liquidation assets consist of liquid assets of almost CHF 42 million. These are offset by the claims of 75.6 million tokens. The crypto from point 1 above, once recovered, will end up being added to the total.
  • The €500+k “Bonus” paid to former board member Cyrill Stäger without any legitimate reason will also be on the liquidator’s repo list.

“This is all relatively good news, as it shows that the liquidator has the main issues on his radar.”

Michael Luckow & friends must now show their colors: will they support the officially appointed liquidator or will they try to replace him with a more “LUP-friendly” one? You never know what the Slippery Brothers are planning…

Trado GmbH

In the meantime, we should not lose sight of Trado GmbH, the hidden company behind the Envion business, headed by Envion’s shadow-CEO Michael Luckow. The last annual report (link) of 2018 reveals that Trado is in deep for millions of euros. The €2 million open receivables are more or less the only asset (92%) of the company, whereas there are almost €2.2m in short term liabilities. The receivables figure is most likely to a large part the dubious claims that Trado has submitted to the liquidator (aka “break even”, about €1.5m). These claims were presented as invoices to Envion CEO Woestmann at the time, but were rejected by Envion due to a lack of supporting documents.

Let’s remember: Back in January 2018, the vast majority of the incoming crypto was exchanged to FIAT, thanks to Matthias Woestmann, the former CEO of Envion AG. This was the single most important action to preserve company value, was in line with German and Swiss best practice (“avoid unnecessary risks”), and without it, we would see a much less favourable liquidation quote now. In contrast, the Crypto illegally withheld by Trado GmbH and never converted to FIAT has significantly shrunk in value, accounting for around 11m USD, as can now be seen from an official statement by the liquidator. To be clear, this crypto was paid in by investors to Envion, and Trado had no legal permission to accept, much less keep investor moneys at any time. Still, for more than 2 years, now, Trado has taken this crypto hostage in order to have leverage to push their claims for phoney bill reimbursement. Thank you, Michael, for losing millions of investor money. Proceedings by Envion against Trado GmbH in this regard are pending in Germany and, according to today’s announcement, are also supported by the liquidator should Luckow continue to refuse to hand over the funds.

Luckow argues that there are outstanding bills. But since there is no or only dubious evidence to support this, the liquidator must now check whether the claims are legitimate. From the beginning, Woestmann reported excessive invoices of Trado GmbH (Woestmann: “around €1.5 million invoices”) without documentation. But it gets even better — let’s remember: Luckow sold EVN team tokens in the spring of 2018, inside the locking period and behind the back of investors, expressively to cover the costs which Envion refused to reimburse. So, why are the same cost now being claimed again? Mr. Luckow did not tell us exactly what was paid, there is zero transparency, and the same amounts are now being submittied to the liquidation again. After the end of the ICO, there was no material business operation, so there were no running costs. This begs the question: what exactly are Trado’s claims? And why does Mr. Luckow think he is allowed to withhold over €10m in investor money from the insolvency estate and thus from the investors? After all, investors’ money is the only thing that has ever created value in the history of Envion — in the liquidator’s statement all other items are valued at zero €.

“Or is it the pending lawsuits and the DWF lawyers that have to be paid?”

That’s the snag. The impending insolvency of Trado GmbH was probably clear to Luckow and his buddies relatively early on. Let’s highlight the fact that Michael Luckow is not a shareholder of Trado GmbH. He is only its managing director. So who is behind Trado? According to FINMA documents, it is Jasper Hellmann and Alfred Luckow, Michael Luckow’s father. This fits exactly into a picture of the shady businessman — Mr. Luckow always stays in the background and pushes others to the fore. This was a common demoninator in the past with his businesses.
As far as the likely insolvency of Trado is concerned, all the assets of Trado GmbH now have to disappear quickly. Off to LUP, where lawsuits against the evil CEO Woestmann are to be filed. Wait a minute! The lawsuits haven’t been filed yet? No, they haven’t. Strange then that the eventual court costs (which usually only arise when a lawsuit is filed) in their cases against Woestmann have actually been paid in advance by Trado. You don’t believe that? But that’s what their latest settlement offer to the plaintiffs says. This may be unusual but it is clearly part of the strategy: Before Trado goes bankrupt, assets (including potential future claims) are siphoned off. If this is true, it is highly criminal — insolvency fraud is a criminal offence. Fortunately, illegal payments that have been made before insolvency can be reclaimed years later by the creditors. Trado will probably not be able to show any remaining assets in the coming verdicts in relation to the civil investor lawsuits, but it secured the possibility of bringing an action against Woestmann and then transferred it to LUP. Now, well hidden in the clauses of the LUP contracts, and probably only noticed by a few “members”, the trustee is instructed to first pay Trado and the founders from the proceeds of the LUP, in particular assume all cost arising from third party claims, including from Envion and the investors. This closes the circle and the money flows — whitewashed — to the founders, who are no longer financially responsible for the damage they have caused. The LUP members and investors go away empty-handed. Who would have thought it!

“LUP, the new shadow man, an “independent” service provider, is said to be the saving anchor of Michael Luckow”

LUP (yet another SCAM) — the details

So, the claims of Trado suddenly ended up in the LUP “pot”. In particular the demands around the so-called “founder tokens” can now be found there. And LUP also wants control over the distribution Envion funds in the liquidation. We have already reported about this here (link). But it gets much better. It seems that gullible investors who signed up to LUP have — again — swallowed copious amounts of “founder” cool-aid in form of the steep “extra free magic money” promises of the “founders”, but they failed — again — to read and comprehend the LUP documents. Or both.

First of all it should be clear to every LUP fan that LUP is the attempt to validate the team tokens. Millions of tokens for which nobody paid anything. And whose participation in the liquidation directly reduces the quota for all investors.

Furthermore, a member of the ENVION-INVESTORS chat on Telegram points out the following interesting facts:

\\ quote \\

“Unfortunately the liquidator in his recent announcement did not mentioned about how to handle the founder tokens. This absence might indicate that they will participate pari passu with paid for investor tokens. The proceeds from this are planned to be channeled to LUP, which then promised to further distribute them to token holders. Extra payout, right? Again, wait a minute…

a) The part of the LUP which describes the rules defining how proceeds are distributed to token holders are so opaque that it leaves ample room for bad actors to siphon away substantial amounts of proceeds before the distribution happens. The quality of the legal drafting of the LUP documents is as bad as the rest of the documents we have seen from these people (i.e. the subscription agreement / prospectus). I wonder if this is continued incompetence, or rather intent.
b) More importantly, any obligations of Trado or the Founders to make payments to Envion, the liquidator or any other 3rd party (including from investor lawsuits against Trado/Founders) will be reimbursed FIRST by the LUP:

“The Trustee shall keep provisions in case of successful enforcement of the Claims in order to make sure that the Trustor and founders can be reimbursed by the Trust Fund if they are legally obligated according to a reasonable assessment by the Trustee to make payments to the Company or investors into the company or other parties based on the activities of the Trustor and founders related to the Company; in case of materializing such payment obligations; the Trustee makes respective payments out of the Trust Fund to the Trustor.

This means: First, LUP uses investor votes via PoA to influence the liquidation to to give founder shares equal value (they should be worth zero), then they use the proceeds to pay the obligations of Trado and Founders to the liquidation and investor lawsuits. This will also include the demands to transfer the 10.9m in crypto!

In essence, to me it looks like LUP is intended to whitewash the founder tokens and “get out of jail” for Trado & Founders. Tokenholders will see little, if anything. Mark my words!”

Just to make it clear: LUP is not done yet. If you believe their own numbers, they might be able to challenge the proposed decisions by the liquidation office, including proposing a different liquidator. They could then even try to prevent collection on the 10.9m held by Trado in the first place. How? The PoA is unrestricted in relation to 3rd parties, and only restricted internally in the relation between token holder and trustee.

From the PoA:
“Furthermore, I authorize the Trustee under indemnification from any personal liability to participate and represent me fully in creditors meetings regarding envion AG, Baar, Switzerland (“Creditor’s Meetings”), and to exercise my voting rights. The Trustee is entitled to make all necessary or expedient declarations.”

This means, LUP can fully use the token holders’ votes via PoAs to influence the liquidation proceeding without limits. If LUP breaches the internal restrictions (“only vote for equal token treatment”), the effect is only that LUP members could sue LUP.
Interestingly, we have seen a similar flawed legal construction in the war between Trado and Woestmann — Woestmann had unrestricted powers legally to increase the share capital of the company (hence, the 2018 capital increase was “legal”), and his powers were only restricted by the private contract between the parties. Evidently, this was not very effective. Seems like the founders learned something and applied it to the LUP.”

\\ end of quote \\

source: comment by AlexC taken from telegram

“LUP is a Chimera, an empty shell”

Let us now come to the obvious lie that the trustee Peter Carlo Moritz Schott-Ghyssaert Aceves (?) is completely independent, outside of the control of the “founders”. On the contrary, he is not. Luckow has direct access and power over these funds. Not only is LUP instructed to settle any claims against Trado as a priority, but Luckow also uses the potential future LUP assets as the source of funds for his settlement offers he sent to suing investors (see details at the end of the article).

taken from LUP website

Another point of the LUP T&C is just as suspect: How does LUP actually define the payout? What does LUP define a payout as? An exact distribution of the funds is not at all clear from that document. Once more, we are pretty sure that few LUP signatories have actually read the T&Cs. The distribution of proceeds is again open to interpretation and abuse. It would have been very easy to have a legally watertight distribution scheme, starting with something along the lines of “Each token participates pro rata”, but rather than being precise, the language is vague gibberish. The section of the LUP document dealing with the distribution uses three different but equally wrong terms for the same circumstance, wobbling from “refund” via “award amount” to “payout amount”, elegantly avoiding the correct term “distribution of proceeds” (see Art. 7.1–7.3). Every lawyer learns about exact phrasing and wording. This is not the level of quality at which DWF operates. It is — again — more likely to be Luckow home-brew style. Further, as we have experienced with the similarly sub-par quality of the Envion investment documents, this will lead to multiple interpretations of what actually should be distributed to LUP members, if anything.

Let’s summarize here:

In LUP, it’s unclear who gets how much money, if any. But Michael Luckow and his Trado associates have cleverly secured themselves the lion’s share of any funds LUP might have, prioritised over any investors. A carful reading of the terms and conditions is enough to see what the LUP really is.

► At this point we would like to point out once again that the LUP PoA signature can be withdrawn at any time.

The settlement offers and victorious civil lawsuits

As already described in a previous article (link), there was a first successful verdict (update 2020–07–02: now 4 won investor lawsuits) at the Berlin Regional Court in the trial of Investors vs Trado. The claims for repayment of the invested money were fully confirmed, as long expected by informed investors. We at EnvionWatch will share the interesting details and the clear language of the judge with regard to the obvious misstatements by Trado in due course.

In the run-up to the verdict, the investors who filed the complaint received an offer for an out-of-court settlement from Trado. It shows the helpless and hapless situation from which Mr. Luckow is trying to extricate himself. Of course, none of the plaintiffs gave any thought to accepting this offer.

But it got even better. A short time later there was surprisingly a second settlement offer. This was also rather ridiculous. However, what was striking is this: it was written in bad English and completely unobjectively formulated. Page after page Matthias Woestmann was presented as the guilty party and Trado as the innocent. The whining was heartbreaking and ridiculous at the same time. Probably it was again from the pen of Michael Luckow. We do not know. But let’s remember: It is on the record that the prospectus had been amended and contained some passages that could not really have been written by a lawyer. The same pattern was observed with LUP as explained in the LUP part above. Trado’s settlement offer to the plaintiffs should be seen as a last-gasp attempt to avert their imminent defeat in court. Because one thing is clear: if Trado loses the civil lawsuits, a verdict of guilty means the collapse of the Trado house of cards and, much worse, the immediate insolvency of Trado GmbH. Which should make the LUP signatories particularly thoughtful: Trado promises the civil plaintiffs shares in LUP and thus, behind the backs of the subscribers, reduces their promised profits. The LUP conditions have therefore changed for everyone. This was nowhere communicated and is another unethical attempt to juggle with money you don’t own.

DWF (lawyers are the devil’s ministry)

So DWF seems able to play along in all areas: they have supported the Envion ICO in a leading role, they advise Trado and legally accompany the LUP. Many, obviously not all, documents were prepared by the law firm. The entire correspondence between Luckow, Trado and the individual plaintiffs in civil law suits runs through DWF. This also concerns the Data Protection Office in Berlin, which is investigating Luckow and the data protection violations in the illegal use of the Envion contact database for the dissemination of LUP mass emails. Statements of claim in civil proceedings often run to 80 pages or more. All this has to be paid for. The costs for this are certainly in the hundreds of thousands of Euros (if not more), which — at the end of the chain — is backed by investor money channeled through the LUP laundromat. Let’s see how long the DWF lawyers will keep up this game. You may finally wish that this parody will soon come to an end.

advertisement by law firm DWF

After all, DWF’s reputation is also at stake.

For now, all eyes are on the liquidator. We, the investors, are of the firm belief that he will do whatever is necessary to secure all the funds. We believe in the legal system

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