OCMT 2024

The Ontario Securities Commission alleged that TeknoScan Systems Inc. and three of its officers and directors perpetrated a securities fraud and made misleading statements to investors regarding a share purchase transaction.

The Capital Markets Tribunal found that the respondents perpetrated a fraud on preferred shareholders who opted into the transaction by omitting fundamental and essential facts from a notice, rendering it objectively dishonest and misleading.

The Tribunal also found that TeknoScan made a materially misleading statement to shareholders, and that the individual respondents authorized, permitted, or acquiesced in this breach.

Allegations of making misleading statements to the Commission were dismissed.

Following a merits decision finding the respondents engaged in a massive crypto asset fraud involving the sale of tokens falsely represented as backed by gold, the Capital Markets Tribunal held a sanctions hearing.

The Tribunal ordered permanent market participation bans, administrative penalties totaling $4.5 million, and disgorgement of over US $51 million in misappropriated investor funds.

The Tribunal declined to order disgorgement of profits from real estate sales due to a lack of causal link.

Costs of $667,605.27 were awarded to the Commission.

The Ontario Securities Commission alleged that Phemex Limited and Phemex Technology Pte.

Ltd. operated an online crypto asset trading platform that sold securities to Ontario investors without being registered and without filing a prospectus.

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

The Tribunal concluded that the respondents breached sections 25(1) and 53(1) of the Securities Act by engaging in the business of unregistered trading and distributing securities without a prospectus.

A case management hearing was directed to prepare for a sanctions and costs hearing.

The Ontario Securities Commission sought approval of a settlement agreement with Kallo Inc., its CEO, and an employee.

The respondents admitted to making materially false or misleading statements regarding non-existent healthcare infrastructure contracts with African governments, contrary to s. 126.2(1) of the Securities Act.

The Tribunal approved the settlement, imposing an administrative penalty of $200,000, costs of $55,000, and various market participation bans, finding the terms reasonable and in the public interest.

The Ontario Securities Commission sought sanctions against Nova Tech Ltd and its founder following a merits decision finding they engaged in unregistered trading, illegal distribution of securities, and breached a temporary cease trade order.

The respondents solicited Ontario investors for foreign exchange and crypto asset trading without registration or a prospectus, and evaded a Tribunal order by instructing investors on how to bypass jurisdictional restrictions.

The Capital Markets Tribunal ordered permanent market participation and director/officer bans, a $2.5 million administrative penalty, $31,000 in disgorgement, and $193,333.52 in costs, citing the egregious nature of the misconduct and the need for specific and general deterrence.

Riot Platforms, Inc., the largest shareholder of Bitfarms Ltd., applied to the Capital Markets Tribunal for an order under s. 127(1) of the Securities Act to cease trade a shareholder rights plan adopted by Bitfarms.

The plan featured a 15% trigger, which was below the 20% threshold established in the take-over bid regime.

Riot did not allege a contravention of Ontario securities law but argued the plan was contrary to the public interest.

The Tribunal clarified the standard for intervening without a contravention, holding that an applicant must demonstrate the conduct undermines clearly discernible animating principles of securities law in a real and substantial way, with a public dimension.

The Tribunal found that the 15% trigger undermined the predictability and certainty of the take-over bid regime.

As Bitfarms failed to demonstrate exceptional circumstances justifying the departure from the 20% threshold, the Tribunal concluded it was in the public interest to cease trade the plan.

The Ontario Securities Commission alleged that the respondents engaged in an illegal distribution of Canopy Growth Corporation shares and that Cormark and Kennedy failed to deal fairly, honestly, and in good faith with Canopy, or alternatively, acted contrary to the public interest.

The allegations centered on a series of transactions involving a private placement, a securities loan agreement, and short sales executed when Canopy was added to the TSX composite index.

The Capital Markets Tribunal dismissed all allegations, finding that the transactions did not constitute an illegal distribution under the extended definition, Canopy was not a client of Cormark or Kennedy, and the respondents did not mislead Canopy or otherwise engage the Tribunal's public interest jurisdiction.

The Ontario Securities Commission alleged that the respondents created and sold a crypto asset called GXToken without registration or a prospectus.

The Capital Markets Tribunal found that the GXTokens were investment contracts and therefore securities.

The Tribunal concluded that the respondents engaged in unregistered trading and illegal distribution of securities contrary to the Securities Act.

The respondents were ordered to pay administrative penalties, disgorge funds obtained from the non-compliance, and pay costs, in addition to being subject to market participation and director/officer bans.

The Ontario Securities Commission sought approval of a settlement agreement with Edward Gong, who admitted to unregistered trading and securities fraud in connection with a pyramid scheme that raised hundreds of millions of dollars.

Gong's company had previously pled guilty to criminal charges and was fined approximately $1 million.

The Capital Markets Tribunal approved the settlement, permanently banning Gong from trading in securities, acting as a director or officer of most issuers, and acting as a registrant or promoter, finding the terms reasonable and in the public interest.

The Ontario Securities Commission alleged that Bridging Finance Inc. and its principals, David and Natasha Sharpe, along with Chief Compliance Officer Andrew Mushore, engaged in multiple frauds and conflicts of interest involving the misappropriation of investor funds.

The Capital Markets Tribunal found that David and Natasha Sharpe perpetrated frauds relating to loans to entities associated with Sean McCoshen, Ninepoint Partners LP, and Gary Ng, diverting millions of dollars for their personal benefit and to facilitate the purchase of Bridging shares.

The Tribunal also found that Mushore participated in the Ninepoint fraud.

Furthermore, the Tribunal concluded that the respondents obstructed the Commission's investigation by making false statements, creating false paper trails, intimidating witnesses, and permitting surreptitious monitoring of a compelled interview.

Bridging was found to have failed to address conflicts of interest, for which the Sharpes were deemed liable as directing minds.

The applicant sought a review of a Canadian Investment Regulatory Organization (CIRO) decision finding that he engaged in unapproved outside business activities and securities-related business by recommending and facilitating the sale of syndicated mortgage investments.

The Capital Markets Tribunal dismissed the application, finding no error in the CIRO Panel's conclusions that the applicant's conduct constituted trading and an unapproved outside business activity.

The Tribunal also upheld the sanctions imposed, which included a permanent prohibition from conducting securities-related business, a $300,000 fine, and $30,000 in costs.

The Capital Markets Tribunal held a sanctions hearing after finding that the respondent breached a 2004 order permanently banning him from acting as a director or officer of an issuer and from trading in securities for 15 years.

The Tribunal ordered permanent market participation bans, disgorgement of over $3.2 million and US$10.7 million, administrative penalties totaling $1,000,000, and $300,000 in costs.

The Tribunal found the respondent's conduct to be a flagrant and recurrent breach of a Tribunal order, warranting significant specific and general deterrence.

The respondents in an enforcement proceeding brought a motion challenging the adequacy of the Commission's witness summaries and seeking further disclosure, including unredacted transcripts and attachments to a letter from a foreign regulator.

The Tribunal found that some witness summaries lacked sufficient precision regarding the documents to be relied upon and ordered the Commission to provide revised summaries.

The Tribunal dismissed the request for unredacted transcripts, finding the redacted information irrelevant, but ordered the disclosure of the letter attachments and a table of concordance for exhibits.

The Ontario Securities Commission brought allegations against Manticore Labs OÜ and Manticore Labs Inc., operators of the CoinField crypto asset trading platform, for violations of the Securities Act.

The Capital Markets Tribunal found that the crypto contracts offered by CoinField were 'investment contracts' and therefore securities.

The Tribunal concluded that the respondents engaged in the business of trading securities without registration, distributed securities without a prospectus, and made false or misleading statements to investors regarding the safety of their funds and withdrawal delays.

The Tribunal also found that the respondents' failure to maintain proper custody of investors' assets and honour withdrawal requests justified a public interest order under s. 127(1) of the Act.

A subsequent hearing was ordered to determine sanctions and costs.

The Ontario Securities Commission alleged that Nova Tech Ltd and its principal, Cynthia Petion, breached the Securities Act by engaging in unregistered trading and illegal distribution of securities through their PAMM product, which purported to offer passive returns from forex and crypto trading.

The Capital Markets Tribunal found that the PAMM product was an investment contract and therefore a security.

The Tribunal concluded that Nova Tech breached the registration and prospectus requirements of the Act, and also breached a temporary cease trade order by continuing to accept investments.

Petion, as sole director and CEO, was found to have authorized these breaches.

Aimia Inc. brought an application under s. 104 of the Securities Act alleging that Mithaq Capital SPC's acquisition of shares a year prior constituted a deemed take-over bid because Mithaq acted jointly with others to exceed the 20% threshold.

Mithaq brought a motion to dismiss the application on a preliminary basis.

The Capital Markets Tribunal found that while Aimia had standing to bring the application, the application was an abuse of process.

The Tribunal dismissed the application because Aimia's long delay in seeking relief, combined with significant intervening events, made the application a misuse of the Tribunal's procedure.

The Ontario Securities Commission sought sanctions and costs against Michael Paul Kraft and Michael Brian Stein following a merits decision that found Kraft engaged in illegal tipping and Stein in insider trading.

The Capital Markets Tribunal ordered market participation bans, administrative penalties, disgorgement, and costs against both respondents.

Kraft was ordered to pay a $200,000 administrative penalty and $150,000 in costs, and was subject to four-year director and officer bans and three-year trading bans.

Stein was ordered to pay a $150,000 administrative penalty, disgorge $29,345, and pay $50,000 in costs, and was subject to three-year director and officer bans and four-year trading bans.

The Tribunal also addressed a preliminary issue regarding the confidentiality of Stein's medical records.

The Ontario Securities Commission alleged that the respondents engaged in unregistered trading, illegal distribution, and fraud in relation to the sale of crypto tokens (Unity Ingot and Dignity tokens).

The Capital Markets Tribunal found that the sale of the tokens constituted investment contracts and therefore securities.

The Tribunal concluded that the respondents acted fraudulently by falsely representing that the tokens were backed by gold and by misappropriating investor funds for personal and unrelated corporate use.

The Tribunal also found that the respondents engaged in the business of trading securities without registration and distributed securities without a prospectus.

Hogg was deemed liable for the breaches of Arbitrade Bermuda.

Following a merits decision finding that the respondents perpetrated a Ponzi scheme fraud on investors and that the individual respondent misled investigators, the Capital Markets Tribunal held a sanctions and costs hearing.

The Tribunal denied the respondents' last-minute adjournment request, finding no exceptional circumstances.

The Tribunal ordered permanent market bans against all respondents, finding their conduct egregious and deliberate.

The Tribunal also ordered joint and several disgorgement of $661,077 and US$245,000 for the primary fraud (reducing the gross amount by principal repaid to investors) and $70,000 for a secondary fraud.

Administrative penalties of $800,000 were ordered jointly and severally for the frauds, with an additional $350,000 penalty against the individual respondent for his separate breaches.

Costs of $295,413.65 were awarded to the Commission.

The moving party brought a motion to strike the Commission's statement of allegations against him, arguing it failed to set out material facts establishing he committed the alleged breaches of the Securities Act.

The Capital Markets Tribunal declined to strike the allegations but ordered the Commission to provide particulars regarding the allegation that the moving party breached s. 126.1(1)(b) of the Act.

The Tribunal found the allegations regarding false or misleading statements under s. 122(1)(a) were sufficient.