Resolution no. 20954

Prohibition, pursuant to article 99, paragraph 1, letter d), of legislative decree no. 58/1998, of the public offering of investments of a financial nature, including through the www.wachsendewerte.com website, to Italian residents

LA COMMISSIONE NAZIONALE PER LE SOCIETÀ E LA BORSA
[THE NATIONAL COMMISSION FOR COMPANIES AND THE STOCK EXCHANGE]

HAVING REAGARD to Law no. 216 of June 7, 1974, and subsequent amendments and additions;

HAVING REGARD TO Legislative Decree no. 58 of February 24, 1998 ('Consolidated Law on Finance') and subsequent amendments and additions;

HAVING ACQUIRED, as a result of the supervision activities carried out by CONSOB, evidence about the fact that an activity had been carried out, including through the www.wachsendewerte.at/it, website, which consisted in offering Italian residents the opportunity to buy hardware for cryptocurrency mining and to subscribe the 'Wachsende Werte and Scryptminig' scheme, in the investor entrusted a third party with the management of the hardware purchased in order to receive a regular return according to a pre-set pattern;

HAVING ESTABLISHED that as of November 2018, the www.wachsendewerte.at/it website - which at the time was also and fully available in Italian - proposed on sale 'forefront hi-tech hardware for cryptocurrency mining' capable of generating 'high returns';

HAVING FOUND that in the 'How it works' section of the said website, the contractual offering was described as follows: '1) Miner order from Wachsende Werte; 2) Delivery of miners on our MiningFarms; 3) Professional connection and maintenance; 4) Payment of mined currencies from your Bitcoin portfolio' with further specification of the fact that 'Wachsende Werte only sells hardware in combination with a hosting contract' and that, therefore, the purchaser could require the miner to be delivered at their address only after one year from the purchase;

HAVING NOTED that according to the information at the time available on the said website, the 'Sales Manager' of the Italian branch of the Wachsende Werte company was a certain Mr Andrea Cerio;

HAVING NOTED that as of November 2018, on the YouTube multimedia platform some videos were available that were attributable to Wachsende Werte; in these videos, Mr Andrea Cerio, in his capacity as 'Sales Manager for Italy' of the said company, described in detail the afore-mentioned investment scheme, describing it as an opportunity to 'receive every month a concrete income' according to a 'return rate proportional to the initial capital invested';

HAVING NOTED that through the videos entitled 'Wachsende Werte product presentation for clients' and 'Wachsende Werte and Scryptmining presentation for Italy', the following information was provided:

- The miners that could be purchased from Wachsende Werte would be managed by an association named 'Scryptmining', to which each associated member would pay an annual fee of euro 29.00 and a one-off fee of euro 300,00 for 'advice and support services' to be provided over the two years covered by the contract;

- The client becomes the owner of the miner'but does not take it home because the miners are transferred to the Scryptmining association to which the client entrusts the management of the miner';

- The 'Scryptmining' association 'has been created by the owners of Wachsende Werte for managing thousands of miners';

- The cost of each mineris 4,500.00 euro;

- 65% of the profit of the association would be allocated to the association members and 35% to the sales network;

- The monthly income promised by 'Scryptmining' (equal to 65% of the profits) would then be divided into two shares of 25% and 40% respectively;

- The 25% monthly income share, 'proportional to the initial capital you invested on buying the miner(s)' would be paid monthly in Bitcoins and guaranteed for at least 24 months, whereas the 40% monthly income share would be deposited in a reserve linked to the trend of the reference cryptocurrency and would be guaranteed up to recovery of the capital initially paid for purchasing the miner;

- The cost of each minerwould be euro 4,500.00;

HAVING NOTED that the 'Wachsende Werte and Scryptmining Project' was also advertised with events and conferences organised in Italy and to which potential investors were invited - via email - to participate;

HAVING REGARD to the fact that, according to the definition under art. 1, par. 1, Letter t) of Leg. Decree no. 58/1998, 'offer of financial products to the public' must be understood to mean 'any communication made to people, in any form and by any means, that presents sufficient information about the conditions of the offer and the financial products offered as to render an investor capable of deciding to buy or underwrite such financial products, including placement by means of licensed bodies';

HAVING CONSIDERED that the elements constituting the offering to the public can be summed up as follows:

a) The fact that the activity concerns 'financial products', a category that includes - pursuant to Art. 1, para. 1, letter u) of Legislative Decree no. 58/1998 - both the 'standardised' figures of 'financial instruments' and 'any other form of investment of a financial nature';

b) The performance of communication activities aimed at having one acquire or subscribe to the financial products and, consequently, including at the very least a description of their main characteristics;

c) the fact that the communication in question is addressed to the Italian public;

HAVING CONSIDERED that the notion of 'investment of a financial nature' implies the coexistence of the following three elements: (i) the investment of capital; (ii) the expectation of financial return; (iii) the assumption of a risk directly connected and related to the investment of capital;

HAVING CONSIDERED that that the aforesaid operation (i) required the subscriber to use their own capital for purchasing miners and entrusting their management to the 'Scryptmining' association, in order to receive regular income according to a predetermined pattern within the framework of the 'Wachsende Werte and Scryptminig Project'; (ii) by virtue of the aforementioned contract, an income was promised equal to 65% of the profits obtained from the management of the hardware purchased, and disbursed as follows: a 25% share, 'proportional to the initial capital you invested on buying the miner(s)' would be paid monthly in Bitcoins and guaranteed for at least 24 months, whereas the 40% monthly income share would be deposited in a reserve linked to the trend of the reference cryptocurrency and would be guaranteed up to recovery of the capital initially paid for purchasing the miner; (iii) envisaged the consequent assumption of a risk related to the use of the entrusted capital;

HAVING ESTABLISHED, therefore, that the aforementioned return would be paid against the use of the investor's capital;

HAVING CONSIDERED, therefore, that the reason of the contract in question was the production of a financial return as consideration for the use of capital entrusted by the recipient of this return, who, therefore, provided their money with the expectation of earning a profit;

HAVING CONSIDERED, therefore, that - with regard to the existence of the requirement referred to in letter a), i.e. the subject of the offering can be qualified as a 'financial instrument' - the trading proposals offered, including via the www.wachsendewerte.at/it website, based on that reported above, do appear to have the characteristics of 'an investment of financial nature';

HAVING ESTABLISHED that the informative contents reported above provided a uniform representation of the characteristics of the investment proposals so as to render investors capable of assessing whether or not to subscribe to the scheme;

HAVING FOUND therefore, that the requirement set out in letter b) is met;

HAVING ESTABLISHED, furthermore, that there are unequivocal indications that the offering in question was addressed to the public of Italian residents. In fact, it should be pointed out that (i) the www.wachsendewerte.at/it website was also available in Italian; (ii) the illustrative videos found on the YouTube platform were in Italian; (iii) the Wachsende Werte company and the 'Scryptmining' association organised events and conferences in Italy, aimed at potential Italian investors;

HAVING FOUND, therefore, that the requirement set out in letter c) is met, since the offering in question is made to the Italian public;

HAVING CONSIDERED, therefore, that the activity set up displayed the characteristics of a public offering of financial products, as defined above;

HAVING ESTABLISHED that the offering in question, on the basis of current evidence, does not qualify for any of the exemptions - contemplated by the combined provisions of Art. 100 of Legislative Decree no. 58/98 and Art. 34-ter of CONSOB Regulation no. 11971/98 - from enforcement of the rules on 'solicitation of public savings';

HAVING REGARD TO art. 94, para. 1, of Legislative Decree no. 58/1998, pursuant to which 'Anyone intending to make an offer to the public must publish a prospectus in advance. To this end, for offers concerning EU financial instruments for which Italy is the Member State of origin and for offers of financial products other than EU financial instruments, prior notification must be sent to CONSOB including the prospectus intended for publication. The prospectus may not be published until it is approved by CONSOB';

HAVING ESTABLISHED that, in relation to the offer in question, neither prior notification nor the information prospectus intended for publication were sent to CONSOB;

HAVING REGARD to CONSOB's Resolution no. 20843 of March 13, 2019, with which pursuant to Art. 99, para. 1, letter b), of the Consolidated Law on Finance, CONSOB implemented the precautionary suspension - for ninety days - of the offering of the 'Wachsende Werte Project' scheme to the Italian public;

HAVING NOTED that after the said Resolution was published, the Wachsende Werte company stated that', 'delivery [of miners] at an address indicated by the client is absolutely possible' and 'at any time the [Scryptmining] association member may require to be delivered the hardware';

CONSIDERING that the aforesaid information elements provided by the Wachsende Werte company do not invalidate the overall coherent reconstruction of the trading structure of the financial transaction in question, as at most, they make reference to the period during which the purchaser would be bound to entrust the management of their hardware;

HAVING CONSIDERED that in the absence of any evidence to suggest a situation other than that outlined in the aforementioned suspension measure, the circumstances de facto and de jure established in the suspension measure are considered to have been ascertained;

CONSIDERING therefore established the offering of financial products to Italian residents in infringement of the laws and regulations referred to in the foregoing;

HAVING REGARD to Art. 99, para. 1, letter d) of Legislative Decree no. 58/98, on the basis of which CONSOB may 'prohibit the public offering if violation of the provisions or regulations referred to under paragraphs a) or b) are confirmed';

HEREBY RESOLVES:

To prohibit the offering of investments of a financial nature to the public resident in Italy promoted through the www.wachsendewerte.at/it website

This Resolution shall be brought to the attention of those whom it concerns and will be published in the CONSOB Bulletin.

This measure may be appealed before the Regional Administrative Court of Lazio within 60 days of the date of service.

June 4, 2019

THE CHAIRMAN
Paolo Savona