If you’re running an MLM company with a passive investment opportunity baked in, you’re offering a security.
In order to offer securities legally, you need to register your opportunity with financial regulators in every jurisdiction you solicit investment in.
Simple enough. Well, not if you’re running Exchange Wallet.
In response to recent securities fraud warnings issued in Germany and Austria, Exchange Wallet’s founder has served up a porky pie sandwich.
When we initially reviewed Exchange Wallet, the company represented its CEO was Christian Kurt Singer.
We couldn’t find any information on Singer, suggesting he didn’t exist.
That seems to have been the case as today there’s no mention of Singer on Exchange Wallet’s website.
Instead the company discloses it is run by founder Benjamin Herzog.
Herzog (right) recently made an appearance on an Exchange Wallet webinar. During the webinar Herzog addressed the recent securities fraud warnings.
As per Herzog, Germany’s and Austria’s securities fraud warnings have, in fact, nothing to do with securities fraud.
[0:45] Te tings we were facing, according to the FMA and BaFin, was most likely caused by the fact that from the tenth of January there’s going to be a whole new regulatory [sic] coming to Europe.
According to cryptocurrency and according how to handle cryptocurrency [sic].
We have been adapting to these new laws very early and we have our constructs ready and in place.
Those are going to um get active as soon as the new regulatory is going to be active.
To be clear, neither the FMA’s or BaFin’s securities fraud warnings mentioned new cryptocurrency laws in Europe.
Securities are and have been regulated in most financial markets for decades – and the fundamental laws, at least those that pertain to investment opportunities, rarely change.
Exchange Wallet launched an investment opportunity and began soliciting investment in Austria and Germany.
Neither Exchange Wallet or Ben Herzog are registered to offer securities in either company, making the opportunity an illegal securities offering.
As far as I know this hasn’t changed, irrespective of any new cryptocurrency laws Europe has or plans to introduce in the future.
If Herzog and Exchange Wallet wanted to actually address the FMA’s and BaFin’s warnings, all they have to do is register and file required financial reports.
These reports would need to be audited by a third party, and importantly would prove Exchange Wallet isn’t just recycling newly invested funds to pay existing investors.
With no other verifiable source of revenue, it’s pretty obvious this is exactly what’s happening. And so you won’t see Exchange Wallet or Herzog register with the FMA, BaFin or any other financial regulator any time soon.
[1:17] So prepare for some minor changes according to the companies during the next few days. Especially according to the new laws.
Exchange Wallet was committing securities fraud prior to the introduction of “new laws”.
Unless the company registers and provides legally required financial reports, they’ll still be committing securities fraud after the “new laws” too.
Herzog concludes by stating that there is “no real issue” with committing securities fraud.
He also has a whinge about Lichtenstein going after Exchange Wallet’s local shell company for securities fraud.
On their website Exchange Wallet provides a corporate address in Estonia. Neither Exchange Wallet or Herzog are registered with Estonia’s Financial Supervision Authority either.
Update October 1st 2020 – This article originally contained a link to the webinar featuring Benjamin Herzog.
As at the time of this update footage of the webinar has been pulled off YouTube.
It appears that Exchange Wallet collapsed on or around August 2020. The scheme was rebooted as Exchange World on August 26th.
As far as I can tell Exchange World is just Exchange Wallet with some added fluff.