Securities Law

Staff of the Ontario Securities Commission alleged that Polo Digital Assets, Ltd. operated a crypto asset trading platform accessible to Ontario residents without complying with registration and prospectus requirements.

The Capital Markets Tribunal found that the Crypto Contracts and Crypto Futures Contracts offered on the platform were 'investment contracts' and therefore securities.

The Tribunal concluded that Polo Digital engaged in unregistered trading and illegal distribution of securities, contrary to ss. 25(1) and 53(1) of the Securities Act.

The Tribunal ordered permanent market participation bans, an administrative penalty of $1.5 million, disgorgement of USD 1,825,417.89, and costs of $138,371.50.

Staff of the Ontario Securities Commission alleged that Cronos Group Inc. improperly recognized revenue and overstated its U.S. goodwill and intangible assets, and that its former Chief Financial Officer failed to take appropriate steps to address revenue recognition issues.

The respondents admitted to the misconduct and entered into settlement agreements with Staff.

The Capital Markets Tribunal approved the settlements, finding that the agreed sanctions, including administrative penalties, costs, and an independent review of internal controls, were in the public interest and achieved specific and general deterrence.

Staff of the Ontario Securities Commission and Aux Cayes Fintech Co. Ltd. sought approval of a settlement agreement regarding allegations of unregistered trading and illegal distributions.

Aux Cayes operated an online crypto asset trading platform accessible to Ontario investors without being registered or filing a prospectus.

The Capital Markets Tribunal approved the settlement, finding it in the public interest.

Aux Cayes admitted to the contraventions and agreed to pay a $600,000 administrative penalty, disgorge $514,950 USD in revenue, and pay $25,000 in costs.

A non-party whose motion for intervenor status was previously dismissed brought an application under section 25.0.1 of the Statutory Powers Procedure Act to keep the Tribunal's decision and reasons confidential.

The applicant argued the panel misunderstood her submissions and the reasons might impact investors.

The Tribunal summarily dismissed the application, finding it improper as it was merely an expression of dissatisfaction with the previous decision and an attempt to re-litigate the matter.

Following a merits decision finding the respondents engaged in unregistered trading and advising regarding contracts for difference (CFDs), the Capital Markets Tribunal held a sanctions hearing.

The Tribunal imposed 10-year market participation bans, an administrative penalty of $250,000, disgorgement of $430,192.50 representing profit-sharing fees and commission rebates, and costs of $200,000.

The Tribunal rejected the respondents' arguments that they did not benefit financially because they subsequently lost the profits in the market, and found their evidence of impecuniosity incomplete.

Alice Zhou brought a motion seeking intervenor status in an enforcement proceeding against Xiao Hua (Edward) Gong for alleged securities fraud and unregistered trading.

Zhou claimed to represent investors in China and raised concerns about Gong's identity and potential forged documents.

The Capital Markets Tribunal dismissed the motion, finding that Zhou was not directly affected by the proceeding, would not likely make a unique and useful contribution, and had other avenues to communicate her concerns, such as contacting Staff.

Staff of the Ontario Securities Commission applied for an inter-jurisdictional enforcement order against the respondents under subsection 127(10) of the Securities Act, based on a decision of the Alberta Securities Commission (ASC).

The ASC had found that the respondents illegally distributed shares and engaged in fraudulent conduct by misappropriating investor funds, including funds from Ontario investors.

The Capital Markets Tribunal found that the statutory threshold was met and that it was in the public interest to protect Ontario investors by reciprocating the ASC's order.

The Tribunal issued a protective order imposing permanent and long-term market prohibitions on the respondents.

The respondent Alli brought a motion for a stay of proceedings, alleging that Staff's former outside counsel was in a conflict of interest and had concocted a fraud allegation to bully him into a settlement.

Staff brought a motion to dismiss Alli's motion on a preliminary basis.

The Capital Markets Tribunal granted Staff's motion and dismissed the request for a stay, finding that Alli had significantly delayed bringing the motion without reasonable explanation, the issues raised were irrelevant to the proceeding, and he failed to meet the high bar for a stay.

The Tribunal also dismissed Alli's request for declaratory relief and granted Staff's request to strike portions of Alli's affidavit and closing submissions that improperly disclosed privileged and irrelevant information.

On the eve of a complex 40-day merits hearing, a self-represented respondent requested a 30-day adjournment, citing a recent loss of counsel, the need to retain new counsel, and medical issues.

The Capital Markets Tribunal dismissed the request, finding that the respondent failed to establish exceptional circumstances as required by Rule 29(1) of the Rules of Procedure and Forms.

The Tribunal noted the lack of explanation for the loss of counsel, the absence of medical evidence, and the significant disruption and costs an adjournment would cause to the multiple parties and witnesses involved.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order against the respondents under subsection 127(10) of the Securities Act, based on a prior decision of the Alberta Securities Commission (ASC).

The ASC had found that the respondents made materially misleading omissions in offering memoranda and perpetrated a fraud by diverting investor funds, imposing significant market bans and financial penalties.

The Capital Markets Tribunal found that the threshold under subsection 127(10) was met and that it was in the public interest to issue a protective order under subsection 127(1).

The Tribunal ordered market bans against both respondents that substantially mirrored the sanctions imposed by the ASC to protect Ontario investors and capital markets.

Following a merits decision finding that the respondents engaged in unregistered trading and illegal distribution of binary options, the Capital Markets Tribunal held a sanctions and costs hearing.

The respondents operated an interconnected global business that raised over $1.4 million from Ontario investors using deceptive practices.

The Tribunal ordered significant market participation bans, administrative penalties of $1,000,000 and $500,000, joint and several disgorgement of $1,407,278.63, and costs of $400,000.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order against the respondent under s. 127(10) of the Securities Act.

The respondent had previously pleaded guilty in the United States to conspiracy to commit securities fraud and securities fraud for his role in a pump-and-dump scheme.

The Capital Markets Tribunal found that the respondent's conviction arose from a course of conduct related to securities.

Given the egregious nature of the fraud and the respondent's status as a former registrant, the Tribunal concluded it was in the public interest to permanently prohibit him from participating in Ontario's capital markets, including permanent trading and director/officer bans.

The respondent pled guilty to criminal fraud for operating a Ponzi scheme that solicited funds for foreign exchange trading.

Staff of the Ontario Securities Commission brought an inter-jurisdictional enforcement proceeding seeking a permanent ban from the capital markets.

The Tribunal found that the respondent's conduct involved investment contracts, which are securities under the Securities Act.

Given the egregious nature of the fraud, the significant investor losses, and the respondent's criminal conviction, the Tribunal concluded it was in the public interest to permanently ban the respondent from trading, acquiring securities, and acting as a director, officer, registrant, or promoter.

The applicant sought an order to keep portions of the adjudicative records and written submissions confidential in a proceeding before the Capital Markets Tribunal.

The records contained compelled evidence from an investigation that had already been made public in a related receivership application.

The Tribunal dismissed the request, finding that the applicant failed to meet the high bar required to depart from the open court principle, especially given that the material had been publicly available for over a year.

Staff of the Ontario Securities Commission alleged that Stableview Asset Management Inc. and Colin Fisher contravened the Securities Act by making untrue statements to clients, disregarding investment parameters, and failing to disclose conflicts of interest.

The parties submitted a settlement agreement for approval.

The Capital Markets Tribunal approved the settlement, finding it in the public interest.

Colin Fisher was ordered to pay a $750,000 administrative penalty, disgorge $300,000, and pay $270,000 in costs, subject to an installment plan.

Both respondents were permanently banned from participating in Ontario's capital markets, with limited exceptions for Fisher.

Staff of the Ontario Securities Commission alleged that the respondent operated an unregistered crypto asset trading platform, breaching registration and prospectus requirements.

The parties reached a settlement agreement wherein the respondent admitted the breaches, agreed to disgorge $2,468,910 USD in revenue, pay $10,000 CAD in costs, and wind down its Ontario business.

The Capital Markets Tribunal approved the settlement, finding it in the public interest given the respondent's cooperation, full disgorgement, and the avoidance of a contested hearing.

Staff of the Ontario Securities Commission alleged that Mek Global Limited and PhoenixFin Pte.

Ltd., operating as KuCoin, sold crypto contracts and crypto futures contracts through their global online crypto asset trading platform without complying with registration and prospectus requirements.

The Capital Markets Tribunal found that the crypto asset products offered on the platform were investment contracts and therefore securities under the Securities Act.

The Tribunal concluded that the respondents engaged in the business of trading in securities without registration and distributed securities without a prospectus, contrary to sections 25(1) and 53(1) of the Act.

The respondents failed to participate in the proceeding.

The Tribunal ordered permanent market participation bans, a $2 million administrative penalty, and $96,550.35 in costs on a joint and several basis.

In an enforcement proceeding against Stableview Asset Management Inc. and Colin Fisher, Staff served draft affidavits of three witnesses.

Fisher brought a motion to exclude portions of the affidavits on the grounds that they were irrelevant, contained improper opinion evidence, drew legal conclusions, or were improper hearsay.

The Tribunal ruled that significant portions of the affidavits were inadmissible at the merits hearing because they were irrelevant to the Statement of Allegations or constituted improper opinion evidence from non-expert witnesses.

The respondent, a mutual fund dealing representative, managed the investments of an elderly, vulnerable client who was diagnosed with terminal cancer.

Shortly before her death, the client executed a will and powers of attorney naming the respondent as her power of attorney for property and personal care, alternate executor, and sole beneficiary of her estate.

The respondent failed to report these appointments and the testamentary gift to his dealer firm, contrary to MFDA Rules and the firm's policies and procedures regarding conflicts of interest.

The Capital Markets Tribunal found that the respondent breached MFDA Rules and his firm's policies, and that his failure to address these conflicts of interest constituted a breach of his statutory obligation under OSC Rule 31-505 to deal with his client fairly, honestly, and in good faith.

Staff of the Ontario Securities Commission alleged that the respondents engaged in insider trading and tipping regarding shares of WeedMD Inc. prior to a public announcement of a major expansion.

Carr, an employee of WeedMD, admitted to illegally tipping Rosborough and trading shares while in possession of material non-public information.

Staff alleged that Rosborough subsequently tipped Graham, who then traded WeedMD shares.

The Tribunal found that while the timing of Graham's trades was suspicious, Staff failed to prove on a balance of probabilities that Graham possessed the material non-public information when he traded.

However, the Tribunal found that Graham made materially misleading statements to Staff during the investigation regarding his work relationship with Rosborough, contrary to s. 122(1)(a) of the Securities Act.

A hearing regarding sanctions and costs was ordered to be scheduled.