{"id":1343,"date":"2026-10-06T23:28:58","date_gmt":"2026-10-06T21:28:58","guid":{"rendered":"https:\/\/sentinelegal.ch\/?p=1343"},"modified":"2026-10-06T23:34:33","modified_gmt":"2026-10-06T21:34:33","slug":"crypto-project-utility-token-fraud-misappropriation-switzerland","status":"publish","type":"post","link":"https:\/\/sentinelegal.ch\/en\/crypto-project-utility-token-fraud-misappropriation-switzerland\/","title":{"rendered":"Disappointed investor in a Swiss crypto project: failure, fraud or misappropriation?"},"content":{"rendered":"

In short.<\/strong> The failure of a crypto project is not a criminal offence. It becomes one when the token sale relied on artful deception (fraud), when funds or tokens handed over for a specific purpose were diverted (misappropriation), or when those managing other people’s money squandered it (criminal mismanagement). Having bought a mere utility token closes none of these doors, and two lesser-known offences, false information on commercial enterprises and unfair competition, do not even require proof of artful deception.<\/p>\n

The whitepaper announced the mainnet launch for the second quarter. Then for the fourth. Since then, the website has not moved, the Telegram channel has switched to read-only and the token trades at a fraction of its issue price. Investors all end up asking the same question, often too late: did they lose a bet, or were they deceived?<\/p>\n

The answer varies from one case to the next. Yet it drives everything else, the route to take and what can realistically be recovered.<\/p>\n

Losing money does not make you a victim<\/h2>\n

A blockchain project remains a risky investment, and Swiss law guarantees no one the success of a start-up. Development that runs late. A technical pivot, a team that burns out, a market that collapses in the year of the launch. None of this is punishable. Prima facie, someone who bought a token on the strength of an ambitious roadmap accepted a risk, and that risk materialised.<\/p>\n

What turns a failure into a criminal matter happens at two moments, the fundraising and the use of the money raised. The offences are not the same, nor is the evidence. They are examined separately below, after a detour through the question that almost always comes first.<\/p>\n

“It was only a utility token”: the argument that does not protect the issuer<\/h2>\n

Since its ICO guidelines of 16 February 2018, FINMA distinguishes payment tokens, utility tokens and asset (investment) tokens. A utility token is meant to give access to a digital service, a platform or a protocol. In principle it is not a security, and the issuer then escapes much of financial market law.<\/p>\n

Many teams conclude that they owe buyers nothing beyond the promised access, some day. That is a comfortable reading. It overlooks two things.<\/p>\n

First, the label binds no one. What counts is the token’s actual function at issuance and the way it was sold. The Federal Administrative Court has held that tokens sold to investors may qualify as securities where they are in fact investment tokens, transferable and suitable for mass trading (judgment B-4185\/2020 of 16 January 2024, published as BVGE 2024 IV\/1). A “utility token” marketed with price projections, an announced listing and return multipliers looks very much like an investment.<\/p>\n

Second, and this is what founders underestimate, criminal law does not care about the FINMA category. Fraud, misappropriation and criminal mismanagement protect the assets of anyone who was deceived or whose money was diverted, whether they bought a share, a participation certificate or an access right to an application that will never exist. In other words, a utility token reduces the investor’s regulatory protection without touching their criminal law protection.<\/p>\n

At the time of the sale: fraud and the question of artful deception<\/h2>\n

Fraud (art. 146 of the Swiss Criminal Code, SCC) happens at the entry point. It requires that the investor was artfully misled at the time of payment, that this error caused the investment, and that the perpetrator acted for gain. An over-optimistic roadmap is not enough, the founders themselves may have believed in it. A roadmap the team knew from the outset to be unachievable, backed by invented profiles, partnerships nobody signed or a security audit that never took place, can on the other hand ground a criminal complaint.<\/p>\n

Everything turns on artfulness. The Federal Supreme Court finds it where the perpetrator builds an edifice of lies or stages a genuine set-up, but also where simple false statements could not be verified, or verification could not reasonably be expected. A contrario, false statements that are easy to verify do not suffice. The victim’s own share of responsibility only excludes artfulness if the victim neglected the most elementary precautions, which remains the exception (ATF 135 IV 76, consid. 5.2).<\/p>\n

This is where crypto cases have their own trap. The blockchain is public, and a prosecutor may be tempted to consider that the investor could have checked everything. In a case concerning an ICO whitepaper in the canton of Zug, the public prosecutor declined to open proceedings, finding the disputed statements “leicht \u00fcberpr\u00fcfbar” (easily verifiable), while acknowledging that they were not entirely correct (Zug High Court, BS 2022 59 of 22 November 2022, consid. 2.2 and 2.4, which reports that position). A complaint that merely says “the whitepaper lied” is therefore likely to end the same way.<\/p>\n

What makes the difference is showing that an ordinary investor could not see through the deception. That a contract presented as “locked” was not, which no non-specialist reads in the code. That the audit displayed on the website was fabricated, that the team presented under prestigious names and careers did not exist, that a campaign of paid influencers and automated accounts simulated community enthusiasm. These are the ingredients of a set-up, and they can be documented.<\/p>\n

A few indicators come up often. Team tokens unlocked before the date announced in the whitepaper. A treasury moved to an exchange a few weeks after the sale closed. A whitepaper rewritten several times without earlier versions remaining accessible. Taken in isolation, none of them proves an intent to deceive on the day of the sale. Their accumulation does, however, change how the case reads.<\/p>\n

After the sale: misappropriation, when the money had a purpose<\/h2>\n

Many cases are decided after the sale, and this is often the firmer ground, because it no longer depends on what the team had in mind at the outset but on what it did with the money.<\/p>\n

Misappropriation (art. 138 para. 1 SCC) punishes anyone who, without right, uses for their own or a third party’s benefit assets entrusted to them. Use is unlawful where the assets are employed contrary to the instructions received, departing from the agreed purpose (ATF 129 IV 257, consid. 2.2.1).<\/p>\n

For a utility token, the starting point is unfavourable, frankly. The buyer pays a price. That price in principle becomes the issuer’s property, and the issuer does not have to keep it on the buyer’s behalf. A sale is not a deposit, and the mere fact that money was badly spent is not enough.<\/p>\n

Three situations nevertheless change the picture.<\/p>\n

The first is earmarked funds. The Federal Supreme Court accepts misappropriation where funds were handed over for a specific purpose meant to preserve a counter-value, such as the purchase of a property (ATF 120 IV 117, ATF 124 IV 9). That purpose must, however, cover or reduce the risk of the person who handed over the money, failing which the offence falls away (ATF 129 IV 257, consid. 2.3). A whitepaper that merely announces “40% development, 30% marketing” will hardly meet that condition. A precise commitment to lock part of the proceeds to secure the token’s liquidity, on a designated address, comes much closer. Whether this case law applies to token sales has not been settled, and each case is argued on its own documents.<\/p>\n

The second, simpler, concerns assets that users handed to the project without transferring their economic ownership. Tokens deposited for staking, funds placed in a vault or a liquidity pool run by the team, crypto-assets held in custody by a platform. These are entrusted assets in the strict sense. Withdrawing them for another use is the textbook case of misappropriation.<\/p>\n

The third covers money collected on behalf of others, for instance where the team gathers contributions for a community fund or a treasury it merely manages.<\/p>\n

In all three cases, the blockchain becomes the investor’s ally. Movements of the treasury, the pools and the team’s addresses are recorded and visible to anyone, often from day one. What a bank would take months to produce at a prosecutor’s request can be reconstructed here within hours, provided one knows where to look.<\/p>\n

Criminal mismanagement: who was managing whose money?<\/h2>\n

Criminal mismanagement (art. 158 SCC) targets anyone who, being bound to manage or oversee the financial interests of another, harms those interests in breach of their duties. An intent to obtain unlawful gain raises the maximum sentence to five years. The offence requires a genuine position of manager, meaning sufficient autonomy over all or part of another’s assets (ATF 123 IV 17, consid. 3b). The damage does not have to be a final loss, an endangerment of the assets suffices where it reduces their economic value (same judgment, consid. 3d).<\/p>\n

In a crypto project, founders who sit on the board of the issuing association, foundation or company manage that entity’s assets. If they transfer the treasury to a company they control, pay themselves remuneration unrelated to the work done, or grant unsecured “loans” to relatives, they harm the entity. The investor is often only affected indirectly, which weighs on their standing as a private plaintiff. This is one of the points to settle before filing anything, and the reason the complaint must be built around the offence that directly harms the investor.<\/p>\n

It is different where the team manages assets on behalf of token holders themselves. A community treasury over which the team holds signing power, a yield fund managed on a discretionary basis, pools where users deposit their assets and the team chooses the strategies. There, a manager’s position towards investors can be argued, and criminal mismanagement becomes a front-line charge alongside misappropriation.<\/p>\n

Two overlooked offences that do not require artfulness<\/h2>\n

False information on commercial enterprises (art. 152 SCC) first. The offence targets, among others, the founder or a member of the management or board of a commercial company, or of another enterprise run on commercial lines, who gives false or incomplete information of considerable importance in communications to the public, liable to cause others to dispose of their assets to their detriment. It requires neither artfulness nor actual damage. A whitepaper published by a company limited by shares or a limited liability company to attract buyers is, plainly, a communication to the public. Where the issuer is an association or a foundation, whether it is an enterprise run on commercial lines is a question that has to be argued case by case.<\/p>\n

Unfair competition next. The Unfair Competition Act (UCA) treats as unfair anyone who gives inaccurate or misleading information about themselves, their business or their services (art. 3 para. 1 let. b UCA), or who misleads customers by creating illusions about the usefulness of their services (art. 3 para. 1 let. i UCA). A scheme whose benefit depends mainly on recruiting new buyers falls under the prohibition of pyramid schemes (art. 3 para. 1 let. r UCA). Intentional conduct of this kind is punishable upon complaint (art. 23 UCA), and customers whose economic interests are harmed have standing (art. 10 para. 1 UCA). For a utility token sold as a service, this is a natural angle. The deadline to file a complaint is, however, three months from the day the perpetrator became known (art. 31 SCC), and it runs fast.<\/p>\n

A whitepaper is not a brochure<\/h2>\n

Under civil law, the token’s classification regains its full importance. Where the token is a financial instrument, anyone who makes inaccurate or misleading statements in a prospectus “or similar communications” is liable for the damage caused to the acquirer (art. 69 para. 1 of the Financial Services Act, FinSA). The roadmap falls within the main prospects, for which the law limits liability to statements made knowingly or without mentioning the uncertainty of future developments (art. 69 para. 3 FinSA). The risk warning found, or not, at the end of the document therefore carries real weight, and its absence gives investors a serious argument.<\/p>\n

If the token is merely a utility token, ordinary contract law and the terms of sale accepted at purchase apply. Many projects are carried by a Swiss association or foundation. The faults of their governing officers then also engage their personal liability (art. 55 para. 3 of the Civil Code, CC), which matters on the day the entity has no money left.<\/p>\n

The regulatory question remains. A sale that amounted to an activity requiring authorisation, and went ahead without one, falls under art. 44 of the Financial Market Supervision Act (FINMASA). A report to FINMA is possible. It reimburses no one, but it can weigh on what follows.<\/p>\n

Acting together, and in what order<\/h2>\n

Swiss law has no class action in the American sense. Several investors can nevertheless sue together in civil proceedings, as joint parties, where their claims rest on similar facts or legal grounds and fall within the same court’s jurisdiction (art. 71 of the Civil Procedure Code, CPC). In criminal proceedings, nothing prevents several injured parties from filing a joint complaint, coordinated by a single counsel.<\/p>\n

Pooling mainly changes the balance of power. An isolated investor who lost a few thousand francs hardly worries a team of founders. An organised group, with a single file and a documented timeline, forces the project (and its lawyer) to respond. The most effective sequence usually starts with a formal demand addressed to the issuer or its counsel, expressly reserving criminal action. If it has no effect, the complaint follows, with requests for seizure (art. 263 of the Criminal Procedure Code, CrimPC) as soon as assets are identified, on an exchange in particular, since exchanges generally identify their customers. The mechanism is the same as the one described for scam proceeds that passed through a Swiss bank account<\/a>.<\/p>\n

The choice of charges is made at this stage, and it is made carefully. A complaint that piles up every conceivable offence dilutes its message. A complaint that retains two or three, each backed by its documents, gives the prosecutor an investigation to conduct rather than a story to untangle. Costs are shared among participants, which makes the approach affordable even where individual amounts are modest.<\/p>\n

What to preserve right now<\/h2>\n

Projects losing momentum close their channels without warning. Before anything else, keep the successive versions of the whitepaper (timestamped web archives often retain them), official announcements and recordings of question-and-answer sessions, complete screenshots of Telegram or Discord exchanges, your proofs of payment, the wallet addresses used and transaction identifiers, and the terms of sale you accepted. If you deposited tokens for staking or in a pool, note the contract address and the date of deposit. This material disappears quickly, and the complaint will rest on it.<\/p>\n

Frequently asked questions<\/h2>\n

I bought a utility token. Do I still have a criminal law remedy?<\/strong>
Yes. Fraud, misappropriation and criminal mismanagement protect your assets whatever the nature of the token. The “utility” label mainly reduces the protection of financial market law. It does not prevent a criminal complaint if the issuer deceived you or diverted assets entrusted to it.<\/p>\n

The whitepaper contained false information. Is that necessarily fraud?<\/strong>
No. False statements that are easy to verify are not enough to establish artfulness (ATF 135 IV 76, consid. 5.2). A set-up must be shown, or that verification was not reasonably possible for you. False information on commercial enterprises (art. 152 SCC) and unfair competition (art. 3 and 23 UCA) can, however, apply without artfulness.<\/p>\n

The project still publishes updates. Can I act anyway?<\/strong>
Yes. Window-dressing activity does not erase what happened at the sale or in the use of the funds. It can even help, if recent announcements contradict what the blockchain shows.<\/p>\n

The founders live abroad. Is it hopeless?<\/strong>
Not necessarily. Where the issuing entity has its registered office in Switzerland, the Swiss authorities are in principle the right point of contact for what happened within it. The founders’ distance complicates enforcement, it does not close the door from the outset.<\/p>\n

Criminal complaint or civil action?<\/strong>
Often both, in that order. The complaint opens tools a civil judge does not have, in particular seizure and access to exchange data. The civil claim, possibly joined to the criminal proceedings, then serves to obtain an enforceable title against those responsible.<\/p>\n

How long do I have to act?<\/strong>
Fraud, misappropriation and criminal mismanagement are prosecuted ex officio, with no complaint deadline. Unfair competition is prosecuted only upon a complaint filed within three months of learning who the perpetrator is (art. 31 SCC). In civil matters, a damages claim becomes time-barred three years after learning of the damage and of the person liable (art. 60 para. 1 CO), subject to a longer period where the damage results from a criminal offence (art. 60 para. 2 CO). In practice, the real deadline lies elsewhere. Evidence disappears with the project’s channels, and funds that could still be seized leave the exchanges.<\/p>\n

On this type of case<\/h2>\n

Sentinel Legal assists investors, alone or in groups, in digital asset cases in Switzerland, from tracing the chain of transactions to the criminal complaint and seizure measures. See also Unrepaid loan or fraud<\/a> on the notion of artful deception. For an initial assessment of your situation: +41 22 512 76 00 or via the contact form.<\/p>\n","protected":false},"excerpt":{"rendered":"

Utility token, broken whitepaper, drained treasury. Fraud, criminal mismanagement, misappropriation: what Swiss criminal law offers token investors.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[29],"tags":[],"class_list":["post-1343","post","type-post","status-publish","format-standard","hentry","category-crypto-cyber-ai"],"acf":[],"_links":{"self":[{"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/posts\/1343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/comments?post=1343"}],"version-history":[{"count":1,"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/posts\/1343\/revisions"}],"predecessor-version":[{"id":1344,"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/posts\/1343\/revisions\/1344"}],"wp:attachment":[{"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/media?parent=1343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/categories?post=1343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sentinelegal.ch\/en\/wp-json\/wp\/v2\/tags?post=1343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}