CITATION: Hogg v. Chief Executive Officer, 2025 ONSC 6214

DIVISIONAL COURT FILE NO.: DC-25-00000079-0000

DATE: 20251107

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

N. Backhouse, S. Nakatsuru, O’Brien JJ.

BETWEEN:

TROY RICHARD JAMES HOGG, ARBITRADE EXCHANGE INC., TJL PROPERTY MANAGEMENT INC. and GABLES HOLDINGS INC.

Kevin Richard and Leanne Gruppuso, Counsel for the Appellants

Appellants

• and –

CHIEF EXECUTIVE OFFICER OF THE ONTARIO SECURITIES COMMISSION

Erin Hoult and Alvin Qian, Counsel for the Respondent,

Respondent

HEARD at Toronto: September 10, 2025

REASONS FOR DECISION

S. Nakatsuru J.

A. OVERVIEW

[1] Troy Richard James Hogg, and his companies, Arbitrade Exchange Inc., TJL Property Management, and Gable Holdings (collectively the “appellants”), promoted the sale of cryptocurrency tokens backed by precious metals, and raised over US $51 million from investors between May 2017 and June 2019. In reality, the tokens were not backed by precious metals, and investor money did not go where it was supposed to.

[2] A panel of the Capital Markets Tribunal (the “Panel”) found that the appellants committed two frauds contrary to the Securities Act, R.S.O. 1990, c S. 5. Additionally, the Panel found that the sale of tokens, without a prospectus and registration amounted to further breaches of the Securities Act.[^1] Among the remedies ordered, Mr. Hogg was held jointly and severally liable for a portion of the disgorgement of the lost funds.

[3] The appellants submit that the Panel made errors of law, denied them procedural fairness, made palpable and overriding errors with respect to the interpretation of evidence, and that the sanctions decision was demonstrably unfit. They submit that the decisions should be set aside.

[4] The respondent submits that the hearing was procedurally fair and no reviewable errors were made. They ask that this appeal be dismissed.

[5] For the following reasons, I would dismiss the appeal.

B. FACTUAL BACKGROUND

[6] Mr. Hogg was a software engineer who developed the cryptocurrency token scheme at issue. He was the founder, sole officer and director of Cryptobontix, the company which issued the tokens. Mr. Hogg was also the sole director, officer and shareholder of Arbitrade Exchange, which promoted the cryptocurrency issued by Cryptobontix to raise market awareness.

[7] Arbitrade Ltd. (“Arbitrade Bermuda”) was established by Mr. Hogg and others, to combine Cryptobontix and Arbitrade Exchange. Mr. Hogg indirectly owned 67% of Arbitrade Bermuda’s shares through his personal holding companies. TJL and Gables are Mr. Hogg’s holding companies.

[8] The concept Mr. Hogg developed was to create a cryptocurrency token backed by gold bullion (the “Tokens”). The appellants represented to the public that the funds generated from the sale of the Tokens on international trading platforms would be used to purchase cryptocurrency mining equipment. The profits earned from mining cryptocurrency would be used: to purchase gold bullion that would “back” the Tokens and create a guaranteed intrinsic “floor value” for each Token; to purchase additional crypto mining equipment to grow the mining operation; to buy back Tokens from sellers in the market; and to fund the crypto mining operation.

[9] Mr. Hogg engaged two individuals to sell the Tokens through crypto asset trading platforms (Livecoin and C-CEX). During the material time, Stephen Braverman and James Goldberg, two shareholders of Arbitrade Bermuda, were involved in selling Tokens through the international exchanges. Mr. Braverman was also Chief Operating Officer and Mr. Goldberg was assistant to the Chairman and Chief Operating Officer of Arbitrade Bermuda.

[10] More than 1.5 billion Tokens were sold. At least US $51.7 million was raised from investors via the Token sales. Arbitrade Bermuda received US $41.6 million of investor funds in 2018. Of that amount, US $7.8 million was used to purchase cryptocurrency mining equipment ultimately owned by Cryptobontix and/or Mr. Hogg. Mr. Hogg, TJL and Gables received the benefit of US $10.1 million. TJL and Gables did not promote or sell the Tokens.

[11] Mr. Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Bermuda promoted the Tokens and solicited investors. During the material time, they made promotional materials available to the public, which presented a consistent picture as to what purchasers could expect in connection with the Tokens. From the outset (i.e., May 2017), the promotional materials included representations that the Tokens were backed by cryptocurrency “mining”. A percentage of Token sale proceeds would be used to buy cryptocurrency mining rigs (basically, computer equipment) and related infrastructure that would be used to mine cryptocurrencies and generate earnings.

[12] The earnings from the cryptocurrency mining were represented to be used as follows: 50% would be used to purchase physical gold bullion that would “back” the Tokens and create a guaranteed intrinsic “floor value” for each Token; 15% (later increased to 20%) would be reinvested into additional mining servers so the size of the cryptocurrency mining operations backing the Tokens would continue to grow; 15% would be used to buy Tokens from sellers in the market (e.g., “buy back” and Token “burning” programs); and 20% (later decreased to 15%) would be used for operations, expansions and upkeep. The Tokens were consistently touted as a “store of wealth” (due to the gold bullion backing) with a “growth component” (due to cryptocurrency mining earnings and growth in investment in gold bullion).

[13] In the Cryptobontix “White Paper” dated November 5, 2017, the Tokens were also represented as a “coupon” for the physical bullion backing them, such that “after year two”, Token holders could exchange their Tokens for bullion.

[14] The above representations were extensively and repeatedly made available to the public and to prospective purchasers of the Tokens, including via social media and online forum posts, email announcements and newsletters, PowerPoint presentations, the White Paper, a press conference, and an analyst report.

[15] In 2019, the Ontario Securities Commission (the “Commission”), began investigating the appellants, Cryptobontix and Arbitrade Bermuda. The Commission conducted compelled interviews of Mr. Hogg. During the compelled interviews, counsel for Mr. Hogg confirmed that Mr. Hogg was taking and relying upon any and all testimonial protections available to him as a compelled witness, including the protections found in s. 9 of the Evidence Act, R.S.O. 1990, c. E.23.

[16] Based on their investigation, the Commission brought allegations against the appellants, Cryptobontix, and Arbitrade Bermuda that they breached provisions of the Securities Act. The dates for the merits hearing were set in April 2023. The hearing was scheduled for 28 days beginning on November 21, 2023, and continuing into January 2024.

C. THE PROCEDURAL BACKGROUND

The Adjournment Motion

[17] On October 20, 2023, the Panel approved a request for withdrawal brought by counsel for the appellants because Mr. Hogg’s counsel had not been paid for quite some time. A week later, Mr. Hogg filed a notice that he intended to act on his own behalf and on behalf of the other appellants.

[18] On October 30, 2023, the appellants sought to adjourn the merits hearing. The Panel considered each ground raised by the appellants separately and found that none of the grounds put forward constituted ‘exceptional circumstances’ requiring an adjournment, as outlined in Rule 29(1) of the Tribunal’s Rules of Procedure and Forms.

[19] At the motion for an adjournment, the appellants argued that considering the recent withdrawal of counsel, Mr. Hogg needed more time to prepare for the merits hearing.

[20] The Panel determined that the recent withdrawal of counsel did not constitute exceptional circumstances because the withdrawal was reasonably foreseeable, and Mr. Hogg was uncertain whether he would be able to raise funds to retain new counsel. Counsel’s withdrawal was reasonably foreseeable because they withdrew for non-payment of accounts dating back to January 2022. Additionally, counsel had communicated to Mr. Hogg that due to non-payment, they were only working on issues related to compelling the foreign witnesses to testify, and not on other matters related to the merits hearing.

[21] The Panel further rejected Mr. Hogg’s submission that he was unable to open the Commission’s electronic disclosure because of broken links. The Panel did not find this submission compelling because disclosure was received by the appellants on October 27, 2022, more than one year before the scheduled commencement of the merits hearing. Since then, other than an inquiry in November 2022, the appellants have not raised an issue about the Commission’s disclosure.

[22] The appellants submitted that they needed more time to compel witnesses in foreign jurisdictions. The Panel concluded that this factor did not constitute an exceptional circumstance because the appellants failed to act diligently in the preceding seven weeks since the Superior Court issued letters of request to compel the foreign witnesses. The Panel also emphasized that since the Commission would be presenting its case first, Mr. Hogg would still have two months to compel the foreign witnesses.

[23] The appellants further argued that the Canadian proceedings should be stayed until the U.S. Securities Exchange Commission proceedings had concluded, because those proceedings would be critical to their defence. The Panel rejected this submission on the ground that the appellants never previously raised an issue with the timing between the US and Canadian proceedings. When the merits hearing dates were set in April 2023, the Securities Exchange Commission proceeding had already been scheduled to begin after the merits hearing.

[24] The Panel rejected the appellants’ argument that the adjournment should be granted because it would not result in any prejudice, on the basis that lack of prejudice does not meet or obviate the exceptional circumstances test. In any event, the Panel found there would be prejudice in the form of wasted time and resources.

The Hearing

[25] After the denial of the adjournment motion, the appellants chose not to participate in the merits proceeding. On the first day of the hearing, Mr. Hogg advised the Panel in writing that “under advisement from my attorneys” he would not be attending the hearing. Relying on Rule 21(3) of the Tribunal’s Rules of Procedure and s. 7(1) of the Statutory Powers Procedure Act, R.S.O. 1990, c S.22, the Panel determined that where a party has been given notice of a proceeding and that party does not attend the hearing, the Panel may proceed without the party’s participation and the party is not entitled to any further notice in the proceeding.

[26] At the merits hearing, the Commission entered as an exhibit the transcript of Mr. Hogg’s compelled interviews, but with redacted portions of the transcript including where Mr. Hogg, through his counsel, claimed the available protections. Additionally, the Commission did not inform the Panel that Mr. Hogg had taken the various protections available as a compelled witness.

D. THE MERITS DECISION OF THE PANEL

A “Security” under the Securities Act

[27] The Panel first addressed the issue of whether the conduct involved a “security” as defined in the Securities Act. The Commission submitted the Tokens were an “investment contract” amongst other defined categories.

[28] The Panel rejected the Commission’s argument that the Tokens themselves were investment contracts. Rather, the Panel found that the initial sale of Tokens, coupled with how the Tokens were represented to prospective purchasers, constituted an investment contract, and therefore a security under the Securities Act.

[29] Applying the common enterprise approach set out in Pacific Coast Coin Exchange v. Ontario Securities Commission, 1977 37 (SCC), [1978] 2 S.C.R. 112, at p. 128, the Panel found that the Commission established the elements of an investment contract:

• Investment of Money: The Panel held that prospective purchasers made an investment of money when they paid for the Tokens with Bitcoin, which is readily convertible into fiat currency. The proceeds collected from the sale of Tokens were available to be used by the enterprise offering the Tokens.

• View to a profit: The Panel found that investors reasonably expected that they would share in the profits of Cryptobontix because the appellants made representations that the Tokens were “backed” by gold and the earnings from the cryptocurrency mining program, and that Token holders would be able to sell the Tokens on other trading platforms. The Panel held that the Commission only needed to establish, in the circumstances that investors would have reasonably had that expectation. The Commission did not need to establish that each individual purchaser had that expectation.

• Common enterprise and efforts of others: The Panel held that given the representations made to investors, they would have reasonably expected that the profitability of their investment in the Tokens depended upon the efforts of others. Namely, their investment would increase in profitability if the funds from the sale of Tokens were used to acquire and operate crypto mining equipment, and that the profits from crypto mining would be used to acquire gold to “back” the Tokens, to acquire and operate more cryptocurrency mining equipment to generate additional returns, and to buy back and “burn” Tokens.

The Frauds

[30] The main findings by the Panel were regarding the frauds. The Panel determined that the appellants perpetrated two fraudulent schemes: (i) the gold title and audit fraud; (ii) the misappropriation of investor funds.

[31] Regarding the gold title and audit fraud, the Panel found that Mr. Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Bermuda all knew, or ought to have known, that their representations in public newsletters and press releases were false or misleading and could cause deprivation to investors. These false and misleading representations included that: the gold bullion backing the Tokens would be a significant feature that would drive their value; the Tokens would “create a store of wealth”; the Tokens would have a floor price; the “tokens will be redeemable in their physical precious metal forms”; Arbitrade Bermuda had entered into an Asset Pledge Agreement with SION, a licensed gold trader on the Dubai gold exchange; Arbitrade Bermuda had secured the gold to back the Tokens (in partnership with SION, Arbitrade Bermuda would be granted US $10 billion worth of physical gold); and, Arbitrade Bermuda had received full title and audit of gold bullion holdings stored at independent security facilities in the amount of 395,000 kgs, with current market value more than US $10 billion.

[32] Contrary to these representations, the Panel found that: the agreements between Arbitrade Bermuda and SION did not pledge or transfer title to any gold, but only pledged a “safe-keeping receipt”; Arbitrade Bermuda never purchased any gold from SION; despite pledging gold, SION did not own any gold; no audit of physical gold was performed; and, there was no evidence that there was any gold backing the Tokens at the material time.

[33] In addition, the panel found that Mr. Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Bermuda made various false or misleading statements directly. The statements made by Cryptobontix and Arbitrade Exchange were attributable to Mr. Hogg because he was the sole officer, director and shareholder of each company during the material time.

[34] Regarding the misappropriation of investor funds fraud, the Panel found that Mr. Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Bermuda made false and misleading statements about the use of proceeds from the sale of Tokens. Further, they knowingly used the proceeds for purposes other than those that were represented to investors, and that they knew or ought reasonably to have known that by doing so they could cause a deprivation to investors. Therefore, the Panel concluded that the appellants acted fraudulently.

[35] More specifically, in their promotional materials, the appellants stated that the proceeds from the sale of Tokens would be used to purchase cryptocurrency mining equipment that would generate funds, which would be used to purchase gold bullion and additional cryptocurrency mining equipment.

[36] The Panel found that instead, significant amounts of the proceeds from the sale of Tokens were used for other purposes unrelated to the acquisition or operation of the mining equipment, and that investors were not told that their funds would be used for any other purpose. They concluded that of the US $51 million raised from investors, US $36.858 million was misappropriated by the appellants.

[37] The Panel further concluded that the false or misleading statements made by Cryptobontix and Arbitrade Exchange were also attributable to Mr. Hogg.

E. THE SANCTIONS AND COSTS DECISION

[38] Following the Merits Decision, in their assessment of the appropriate sanction, the Panel considered the seriousness of the misconduct, the appellants’ level of activity, the recurrence of the violations, the profits garnered, specific and general deterrence, remorse of Mr. Hogg, and the financial consequences of sanctions.

[39] The Panel found the misconduct to be serious due to the nature and scale of the violations.

[40] The Panel concluded that the appellants’ level of activity was high, and that they were able to raise significant amounts of money and misappropriated a significant portion of those funds raised.

[41] Further, the violations were recurrent, in that the misconduct took place over the span of more than two years, and that Mr. Hogg, Arbitrade Bermuda, TJL and Gables directly benefited from their misconduct.

[42] The Panel rejected Mr. Hogg’s expressions of remorse because they interpreted his statements as not taking responsibility for the harm he caused. Rather his statements only expressed regret for having become involved with other bad actors.

[43] Likewise, the Panel rejected what they described as “bald assertions” by Mr. Hogg about his financial difficulties.

[44] The Panel ordered the following administrative penalties: (a) Arbitrade Bermuda: $2 million; (b) Mr. Hogg and Cryptobontix: jointly and severally, $1 million; (c) Mr. Hogg and Arbitrade Exchange: jointly and severally $500,000; (d) Mr. Hogg and Gables: jointly and severally $500,000; and(e) Mr. Hogg and TJL: jointly and severally $500,000.

[45] Further, the Panel ordered permanent market participation bans against the appellants, and a director and officer ban against Mr. Hogg.

[46] In addition, the Panel concluded that Arbitrade Bermuda should disgorge US $41,622,965.27, for which Mr. Hogg and Cryptobontix should be jointly and severally liable to disgorge US $7,822,296.72. Mr. Hogg was also to disgorge an additional US $10,109,038 of which amount, TJL was to be jointly and severally liable to disgorge US $5,637,259.39, and Gables to be jointly and severally liable to disgorge US $4,345,737.14.

[47] Pursuant to section 127.1 of the Securities Act the panel awarded the following costs: (a) Mr. Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Bermuda to pay costs to the Commission in the amount of $534,084.22, for which they were jointly and severally liable; and (b) Mr. Hogg, TJL and Gables to pay costs to the Commission in the amount of $133,521.05, for which they were jointly and severally liable.

F. JURISDICTION AND STANDARD OF REVIEW

[48] Under s. 10 of the Securities Act this Court has jurisdiction to hear an appeal of a final decision of the Capital Markets Tribunal.

[49] Because this appeal is brought pursuant to a statutory appeal mechanism, appellate standards of review apply: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 37.

[50] Questions of law are reviewable on a correctness standard. Questions of fact and questions of mixed fact and law are reviewable on a standard of palpable and overriding error: Quadrexx Hedge Capital Management Ltd. v. Ontario Securities Commission, 2020 ONSC 4392 (Div. Ct.), at paras. 77-78.

[51] Questions of procedural fairness are assessed on a standard of correctness: Law Society of Saskatchewan v. Abrametz, 2022 SCC 29, [2022] 2 S.C.R. 220, at para. 30.

G. THE ISSUES ON APPEAL

[52] At the appeal hearing, the appellants[^2] focused on what they characterized as the two key errors of law committed by the Panel. They are:

• The transcript of compelled interviews by investigators of the Commission were erroneously admitted by the Panel at the hearing because Mr. Hogg took the protection of s. 9 of the Evidence Act; and,

• The Panel erred in its determination that the crypto Tokens were a “security” under the Securities Act.

[53] The remaining issues left in writing are the following:

• The denial of the adjournment of the merits hearing was procedurally unfair;

• The Panel erred in finding the appellants committed fraud;

• The Panel erred in finding Mr. Hogg was a director and officer of Arbitrade Bermuda;

• The disgorgement sanction and costs order were unfit.

H. ANALYSIS

1. The admission of the transcript of the interviews of Mr. Hogg

[54] Before addressing the merits of this ground of appeal, the respondent objects to it being entertained at all on the basis that it is being raised for the first time on appeal: Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130, at para. 18.

[55] I would exercise the court’s discretion to hear this ground of appeal. Given their lack of participation in the hearing, the appellants were not present to offer any objection or argument to the admission of the transcript. Moreover, the transcript had been edited to only those relevant portions the respondent was relying on at the hearing. The portion of the transcript where Mr. Hogg raised that he was taking the protection of s. 9 of the Evidence Act at his interview was redacted. Thus, the Panel was not aware of this potential admissibility issue. Finally, the respondent conceded that from their point of view, no further adjudicative facts are required to resolve the matter on appeal. In these circumstances, it is fair and just that the appellants be permitted to raise the issue on appeal.

[56] Subsection 9(1) of Ontario's Evidence Act prevents a witness from refusing to answer questions by claiming the answer might incriminate them or establish liability in a civil proceeding. Subsection 9(2) states that such compelled answers cannot be used as evidence against the witness in any civil proceeding or in any proceeding under any Act of the Legislature.

[57] The appellants submit that where a party subject to an investigative interview under the Securities Act claims the protection of s. 9 of the Evidence Act, the transcript from the examination cannot be relied upon in the subsequent administrative hearing before the Tribunal. This is in part because an investigation under Part VI is not a part of the Panel proceeding, even if that proceeding is commenced because of the investigation. In arguing this, the appellants rely heavily on a Capital Markets Tribunal decision, Teknoscan Systems Inc. (Re), 2024 ONCMT 32, at para. 64.[^3]

[58] The appellants point out that it was open to the respondent to summons Mr. Hogg as a witness to the hearing if they required his evidence, but they chose not to do so.

[59] I would not give effect to this ground of appeal.

[60] I find that Mr. Hogg’s reliance on s. 9 is not a bar to the use of his compelled interviews at the hearing because this regulatory proceeding under s. 127 of the Securities Act does not constitute a separate proceeding from the investigation in which the compelled interviews were taken. I conclude this for the following reasons.

[61] First, the regulatory context of the Securities Act involves the protection of the public from unscrupulous market trading practices which justifies inquiries of a limited scope to empower the regulator to obtain evidence to regulate the securities industry: British Columbia Securities Commission v. Branch, 1995 142 (SCC), [1995] 2 S.C.R. 3, at para. 35.

[62] It is not contested that the predominant purpose of the compulsion of Mr. Hogg’s evidence was to further this regulatory purpose. Thus the admissibility of his compelled testimony did not depend upon rules regarding residual evidentiary immunity under s. 7 of the Canadian Charter of Rights and Freedoms: R. v. S.(R.J.), 1995 121 (SCC), [1995] 1 S.C.R. 451, at pp. 558-564.

[63] In keeping with that, no Charter issues are raised by the appellants on appeal.

[64] Second, the jurisprudence does not support the appellant’s position.

[65] In Todorov v. Ontario Securities Commission, 2018 ONSC 4503, 142 O.R. (3d) 578, (Div. Ct.), this Court dealt with the very issue of the admissibility of a compelled interview under s. 13 of the Securities Act in a s. 127 proceeding. In that case, the appellants argued that the use of the s. 13 interview was contrary to the Charter. The Court rejected their submission and held that given this was an administrative proceeding, the admission and use of compelled testimony in the hearing against the appellants was permissible. The Charter did not apply. While likely obiter dictum, at para. 48, Thorburn J. (as she then was) succinctly disposed of any suggestion that s. 9 of the Evidence Act might preclude admission as well:

In this case, compelled testimony is not prohibited by s. 9(2) of the Ontario Evidence Act nor did the Appellants ever claim the protection of s. 9(2) during their interviews (Re Sextant Capital Management Inc. et al., 2011 ONSEC 15, 34 O.S.C.B. 5829, at para. 9.).

[66] Noteworthy is the fact that Thorburn J. cited the very authority that the panel in Teknoscan Systems Inc. declined to follow.

[67] In Alberta (Securities Commission) v. Brost, 2008 ABCA 326, 2 Alta. L.R. (5th) 102, at paras. 37-38, the court came to the same conclusion that s. 6 of the Alberta Evidence Act, R.S.A. 2000, c. A 18, a similar provision to s. 9 of the Ontario Evidence Act, did not affect the admissibility of compelled interviews under their securities legislation. At para. 37, the court found that the compelled interviews were “not used to incriminate…nor were they used in other proceedings”. They “were used in the same regulatory proceeding in which they were obtained.” Thus, the interviews were admissible.

[68] The reasoning in Brost was adopted by this Court in College of Physicians and Surgeons of Ontario v. Yazdanfar, 2013 ONSC 6420, 317 O.A.C. 53, (Div. Ct.), at paras. 65-68. At Dr. Yazdanfar’s discipline hearing over a failed liposuction operation, the College sought to introduce the transcripts of interviews conducted by a College investigator with Dr. Yazdanfar. Those interviews were deemed by the governing health professions legislation to have the protections found in s. 33 of the Public Inquiries Act, 2009, S.O. 2009, c. 33, Sched. 6, which are effectively the equivalent of s. 9 of the Evidence Act. In finding the transcripts admissible, Harvison-Young J. (as she then was) followed Brost and held that Dr. Yazdanfar’s interviews formed a part of the same regulatory proceeding initiated with the same ultimate regulatory purpose, that is, the protection of the public. Accordingly, the restriction found in s. 33 on the use of answers given in other proceedings was not applicable.

[69] In coming to this conclusion, Harvison-Young J. noted at para. 67 that “treating the Committee hearing as a separate or other proceeding would effectively undermine the purpose of the regulatory framework and the onerous obligation placed on self-regulating bodies to protect the public.”

[70] A similar observation can be made with regards to the circumstances presented in this case.

[71] Third, Teknoscan Systems Inc. is obviously not binding. But nor is it persuasive.

[72] Teknoscan Systems Inc. appears to stand alone in relation to other Capital Market Tribunal decisions on this issue. For example, in Sextant Capital Management Inc. et al., 2010 ONSEC 25, at paras. 2, 7-10, despite the subject having taken the protection of s. 9, the panel relying on Brost, found that the compelled testimony could be used in the same regulatory proceeding in which it was obtained because the investigative stage and the adjudicative stage were not separate proceedings, but rather stages in one proceeding. See also: Agueci (Re), 2013 ONSEC 45, at paras. 123-124; York Rio Resources Inc. et al., 2011 ONSEC 37, at paras. 67-76.

[73] The panel in Teknoscan Systems Inc. (at paras. 61-66) declined to follow the rulings in Sextant and Agueci because of their view that these decisions were predicated on the erroneous premise that a Part VI investigation under the Securities Act was part of, or one and the same as, an administrative enforcement proceeding under s. 127 of the Securities Act. It was significant to that panel that a Part VI investigation by the Commission could ultimately result in various processes and remedies that could be sought by the respondent: an administrative proceeding under s. 127 of the Securities Act; an application under s. 128 of the Securities Act before the Superior Court of Justice for declaratory and other ancillary relief; a prosecution under the Provincial Offences Act in respect of one or more alleged breaches of s. 122 of the Securities Act; and the delivery of a privileged report to the Commission as provided for in s. 15 of the Securities Act. Thus, in their view, the Securities Act contained no support for the suggestion that an investigation under Part VI either initiated or was part of a subsequent administrative proceeding brought under s. 127.

[74] Respectfully, the panel in Teknoscan Systems Inc. overemphasized the significance of the different remedies available to the Commission after the completion of a Part VI investigation. The various separate remedies that could arise from an investigation does not impart to them the character of separate proceedings for the purposes of s. 9. This interpretation is in keeping with the following comment set out in Wilder v. Ontario Securities Commission (2001), 2001 24072 (ON CA), 53 O.R. (3d) 519, at para. 23, about the nature of the overall Securities Act:

…the overwhelming message (of the scheme) is one of remedial variety and flexibility, rather than one that creates hived-off areas of remedial exclusivity. A court should be loath to prefer a rigidly narrow and literal interpretation over one that recognizes and reflects the purposes of the Act.

Regardless of any amendments to the Securities Act since Wilder, the force of that principle remains.

[75] Finally, in coming to their decision, the panel in Teknoscan did not deal with any of the judicial cases above-mentioned, which, if not binding, certainly merited their careful attention.

2. The determination that the cryptocurrency was a security

[76] The appellants submit that the Panel erred in finding that the sale of the Tokens together with the representations made to purchasers, were “investment contracts” and therefore securities under the Securities Act. They further argued that the Panel expressly took the approach undertaken in an American authority, SEC v. Ripple Labs, Inc., 2023 US Dist LEXIS 120486 (SDNY July 13, 2023) at p. 22-24, but then declined to follow it, in finding that there was an investment contract. The appellants’ position is that to satisfy a necessary part of the legal test for an investment contract, the purchasers would have to know that they were purchasing the Tokens from Cryptobontix. There was almost no evidence that the purchasers knew who they were buying the Tokens from.

[77] I do not accept this submission for the following reasons.

[78] To begin the analysis of this issue, this ground of appeal raises a question of mixed fact and law. Whether something is a security is a purposive, fact-driven inquiry: VRK Forex & Investments Inc. v. Ontario Securities Commission, 2023 ONSC 3895 (Div. Ct.), at para. 7. No extricable error of law arises in the circumstances of this case.

[79] Second, the Panel got the test right. They cited the leading authority of Pacific Coast Coin Exchange and analyzed the four elements of the common enterprise approach to the definition of an investment contract:

(a). An investment of money;

(b). With a view to profit;

(c). In a common enterprise where the success or failure of the enterprise is interwoven with, and dependent on, the efforts of persons other than the investors; and

(d). The efforts made by those others significantly affect the success or failure of the enterprise.

Moreover, they carefully applied the evidence to each element and determined they were met.

[80] Third, while it is true the Panel said at one point in their reasons that they preferred the approach and analysis of Ripple Labs, the context of that portion of their reasons must be carefully scrutinized. The reference to Ripple Labs is found in the section headed “What is the “investment contract” in this case?”. In that section, the Panel rejects the respondent’s argument that the Tokens themselves were the investment contract, as opposed to the overall transaction or scheme for the offer and sale of the Tokens, including the representations made to investors, considered together.

[81] They rejected the respondent’s argument that a concurrent level Capital Markets Tribunal decision warranted the conclusion that cryptocurrency was always a security. Rather, the Panel held that such a determination depended on the facts of each individual case. The Panel found that the Tokens, considered alone, did not incorporate or reflect what the purchasers of the Tokens might reasonably expect from their investments. Thus, the purchasers’ reasonable expectations, based upon the representations that were made to them in promotional materials, were an essential element of an investment contract. Moreover, the Panel found that the Tokens were not an investment instrument like a share certificate. After reasoning in this fashion, the Panel then stated the following passage relied upon by the appellants:

On this question of what is the “investment contract”, we prefer the approach and analysis taken in the US decision in SEC v. Ripple Labs, Inc., namely that the subject of a “contract, transaction or scheme” can be a variety of tangible or intangible assets. The subject itself is not necessarily a security by virtue of being an investment contract. Although the Tokens are the subject of the transaction or scheme in this case, we find that the Tokens (like the bags of silver coins in Pacific Coast Coin and the citrus groves in Howey, involving contracts in which investors bought citrus groves and essentially leased them back to a service provider to harvest, pool and market the produce), in and of themselves, do not embody the elements of an investment contract.

[82] In my opinion, in this passage, the Panel was not applying the law as set out in Ripple Labs as the appellants contend. They clearly applied the test in Pacific Coast Coin Exchange. Nor were they finding Ripple Labs judge’s application of the American test to the facts in that case persuasive in their assessment of the evidence in the case at bar. The only principle the Panel adopted was a narrow one. That is, an investment contract can be about tangible assets or intangible assets, and that a cryptocurrency is not per se always an investment contract. Additionally, the Panel never goes beyond such a limited reference to Ripple Labs when one reads the entire reasons.

[83] Fourth, given this context, the appellants’ submission that the Panel somehow erred by failing to properly apply Ripple Labs is misplaced. In Ripple Labs, the sale of some of the crypto tokens to certain buyers did not qualify as an investment contract because the company and the purchasers of the tokens did not know each other and the purchasers did not know that they were purchasing from the company. Therefore, the purchasers did not have a reasonable expectation of profit derived from the efforts of the company. Further, the court found that there was no evidence that the buyers who purchased the tokens on digital exchanges, could “parse through multiple documents and statements…which include statements (sometimes inconsistent) across many social media platforms.”

[84] In my view, any precedent set by Ripple Labs is very much confined to the facts before it. The Panel had different evidence to consider. It did not err in failing to reach a similar conclusion about the proof of a security in the case at bar as it was done in Ripple Labs.

[85] Fifth, regardless of the application of Ripple Labs, the appellants still argue that to establish the third and perhaps fourth element of the test in the common enterprise approach, the respondent would need to provide evidence that demonstrates that the purchasers knew they were buying the tokens from the company. The appellants submit that the Panel did not undertake this required analysis and that there was almost no evidence presented at the merits hearing to satisfy this requirement.

[86] I am not persuaded the Panel erred in this way.

[87] I agree with the respondent that the definition of an investment contract must be determined purposively and broadly. Accordingly, the meaning of investment contract must embody “a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits”: Pacific Coast Coin Exchange, at p. 127.

[88] The analysis conducted by the Panel was in keeping with this approach.

[89] While the appellants point to various deficiencies or weaknesses in the evidence, these arguments are essentially directed at the weight of the evidence. Absent a palpable and overriding error, these findings are afforded deference: Hydro-Quebec v. Matta, 2020 SCC 37, [2020] 3 S.C.R. 595, at para. 33.

[90] I do not see any palpable and overriding error.

[91] Although the appellants argue to the contrary, the Panel made findings in relation to when and how the tokens were sold, outlined generally how the tokens were sold, the approximate number sold during the material time, and conducted a chronological review of the promotional materials to determine the reasonable expectations of the purchasers.[^4] Moreover, the Panel was cognizant of the nature of the scheme when they correctly observed “the reality [is] that the sale of crypto assets, by its very nature, can make it difficult to identify individual purchasers”.[^5]

[92] Having dismissed the last ground of appeal focused on by the appellants, I turn to the grounds of appeal left mainly in writing.

3. The denial of the adjournment motion

[93] The appellants submit that the Panel’s refusal of the adjournment request was a breach of procedural fairness. The appellant argues in bringing the motion for an adjournment, Mr. Hogg’s circumstances were exceptional because he had recently lost his counsel and did not have time to prepare his defense as a self-represented litigant. Additionally, Mr. Hogg submitted that he required more time to summon critical witnesses who were in foreign jurisdictions.

[94] The Capital Market Tribunal’s Rules of Procedure require a party to demonstrate “exceptional circumstances” to obtain an adjournment, consistent with the objective that proceedings be “conducted in a just, expeditious and cost-effective manner.”

[95] The Panel’s discretionary power to permit or deny an adjournment is usually afforded deference, and the standard of review is akin to one of reasonableness: Todorov, at para 34.

[96] I agree with the respondent’s position that the appellants are essentially asking this Court to re-weigh the factors the Panel considered and to reach a different conclusion. That is not appropriate. The Panel balanced the various competing interests at play and reasonably concluded that the appellants had a reasonable opportunity to prepare their defence. The circumstances on which they relied as a basis for the adjournment were foreseeable and avoidable and did not constitute valid reasons for an adjournment.

[97] For instance, the appellants’ counsel withdrew due to non-payment of accounts but this state of affairs dated back 22 months before the adjournment motion. Moreover, Mr. Hogg knew prior counsel was not preparing for the hearing, other than working to compel the attendance of foreign witnesses, given the fee dispute. At the motion, Mr. Hogg offered no basis to suggest they would be in a position in the near future to afford to retain new counsel. Additionally, considering these circumstances, Mr. Hogg provided no acceptable explanation why he was not prepared to proceed without counsel. The Panel rejected Mr. Hogg’s assertion he was having technical issues accessing the respondent’s disclosure provided many months earlier.

[98] Another example, regarding the pursuit of obtaining the attendance of foreign witnesses, judicial letters to facilitate that had been requested seven weeks earlier. The appellants had not been diligent in obtaining these witnesses’ testimony. The information received from lawyers in the foreign jurisdiction was that it may take months to obtain the evidence and there was no certainty provided as to when it might come to fruition. In addition, the Panel observed that the schedule of the hearing dates, which were broken up between the Commission’s case and the appellants’ case, and spanning a length of time, afforded the appellants the opportunity to pursue the foreign witnesses, if they were so inclined. The appellants did not. They refused to participate in the hearing.

[99] In the end, I would dismiss this ground of appeal. The Panel did not misdirect themselves nor is the decision so clearly wrong as to amount to an injustice: Ontario Securities Commission v. Go-To Developments Inc, 2022 ONCA 328, at para. 11, leave to appeal refused, [2022] S.C.C.A. No. 236; Katebian v Ontario (Securities Commission), 2025 ONSC 3249 (Div. Ct.), at paras. 46-47, 61, leave to Ont. C.A. requested.

4. The finding the appellants committed fraud

[100] There is little merit to this ground of appeal. No palpable and overriding error has been demonstrated by the appellants in the Panel’s determination of fraud.

[101] With respect to the fraud about gold bullion backing the Tokens, the Panel made no error. The Panel found that the representations were misleading. They found there was no gold acquired, no gold backing the Tokens, and no audit conducted confirming the acquirement of gold as the misleading representations stated. The Panel was aware at the beginning of the material time, the representations indicated only some form of interest in gold was backing the Tokens, but correctly found that these representations evolved over time. As well, the Panel did not err in concluding that there was no actual physical gold possessed contrary to the representations. The evidence that Arbitrade Bermuda had purchased gold impressions of Nelson Mandela’s hands did not affect this conclusion. These items were not acquired by or for Cryptobontix, the Token issuer. Moreover, the press releases in which the acquisition was announced largely distinguishes it from the gold bullion that was to back the Tokens. There was no reason to believe the gold in such historically significant items would be melted down and redeemable against Tokens.

[102] Regarding the misrepresentations, the appellants argue that the Panel erred in concluding that there was no evidence that investors were told that their funds would be used for purposes other than acquiring crypto mining equipment. They point to the Cryptobontix’s “White Paper” which disclosed that some of the funds from Token sales would be used for other purposes such as operations.

[103] In my view, this does not demonstrate a palpable or overriding error. The Panel found that significant amounts of investor funds were used not only for purchasing cryptocurrency mining equipment, but also for other purposes entirely unrelated to the acquisition or operation of mining equipment including about US $14 million out of Token sales of at least US $51 million provided to or for the benefit of Mr. Hogg, TJL, Gables and Arbitrade Bermuda which was then used for other purposes. As found by the Panel, it is not necessary that all investor funds must be misappropriated to establish fraud. Rather it is sufficient that a significant amount of investor funds was misappropriated contrary to representations to the investors.

5. The finding Mr. Hogg was the “directing mind” of Arbitrade Bermuda

[104] The appellants submit that the Panel misconstrued the evidence and erred in law in concluding that Mr. Hogg was a director and officer of Arbitrade Bermuda at the material time, by improperly conflating share ownership with being a directing mind of a company. The appellants highlight that Arbitrade Bermuda was governed by a Board of directors and had officers who ran the day-to-day operations.

[105] I would not give effect to this ground of appeal.

[106] No palpable and overriding error was made in the Panel’s findings. Subsection 1(1) of the Securities Act defines “director” and “officer” to include any individual performing the functions of such positions, regardless of formal titles.In finding Mr. Hogg was a director and officer of Arbitrade Bermuda, the Panel applied well-established principles for determining whether someone is acting like a director or officer and found many of the factors present in this case. They did not solely focus on Mr. Hogg’s share position with the company and conflate that with him being a directing mind.

[107] I further agree with the respondent’s position that success on this ground of appeal would have no material effect as Mr. Hogg was not held liable for the administrative penalty or disgorgement amounts, other than a portion ultimately obtained by him and/or Cryptobontix, ordered against Arbitrade Bermuda which is not an appellant.

6. Sanctions and costs

[108] An appeal court will only interfere with a tribunal’s sanctions and costs decision if they have made an error in principal or if the penalty is clearly unfit: College of Physicians and Surgeons of Ontario v. Peirovy, 2018 ONCA 420, 143 O.R. (3d) 596, at para. 38; Kitmitto v. Ontario (Securities Commission), 2024 ONSC 1412 (Div. Ct.), at para. 170.

[109] The appellants first argue that the Panel lacked jurisdiction to order disgorgement on amounts from alleged distributions outside of Ontario and Canada. They point out that in the merits decision the Panel noted that there were only two identified purchasers of tokens that were located within Canada.

[110] The appellants also allege that the disgorgement order was excessive and unfair. It is submitted that the Panel overlooked the fact that the disgorgement order against Arbitrade Bermuda would have little deterrent effect on other involved parties, including the members of Arbitrade Bermuda’s board. Additionally, the appellants submit that since Arbitrade Bermuda was not found to be Mr. Hogg’s alter ego, a joint and several disgorgement order will have disproportionate and unfair monetary consequences for Mr. Hogg.

[111] These arguments are unpersuasive.

[112] I find no error in principle made by the Panel. I do not agree that the Panel erred by assuming jurisdiction over Token distributions outside of Ontario or that they failed to address this issue. Mr. Hogg, an Ontario resident, was the driving force behind the development of the Tokens at issue. He was found to be the directing mind, in addition to being the majority shareholder, of Arbitrade Bermuda which structured and ran the business related to the tokens. The Panel was well aware their power to order the appellants to disgorge to the Commission amounts obtained had to be a result of the non-compliance with Ontario securities law. The Panel was satisfied that the transactions, wherever they took place, had sufficient connection to Ontario. This finding was open to them to make on the evidence given the connection of the parties and their actions to Ontario.

[113] I also disagree with the appellants’ submission that the disgorgement order was excessive and unfair. The purpose of disgorgement is not to punish. Rather its purposes include ensuring public confidence in the markets is maintained and deterring non-compliance with securities law by removing the prospect of receiving and retaining moneys from noncompliance: s.127(1)10 of the Securities Act. The Panel looked at the underlying facts and circumstances of the case and determined that the sanctions imposed were proportional to the conduct of the parties. Deference should be afforded to the Panel’s discretionary decision: Katebian, at para. 103; Aziz v. Ontario (Securities Commission, Chief Executive Officer), 2024 ONSC 4691 (Div. Ct.), at para. 84, leave to Ont. C.A granted.

[114] Disgorgement may be ordered on a joint and several basis where there is sufficient direction and control between the entities: Katebian, at paras. 100-103, 105. As discussed above, the Panel did not err in making the factual finding that Mr. Hogg was performing the functions of an “officer” or “director”. Consequently, the decision to make Mr. Hogg jointly and severally liable to the corporate entities was reasonable to ensure individuals are not sheltered from sanctions if they orchestrate misconduct through a corporation they direct and control: Phillips v. Ontario Securities Commission, 2016 ONSC 7901, 135 O.R. (3d) 771, (Div. Ct.), at para. 74; Aziz, at para. 94.

[115] In terms of costs, the appellants submit that the costs awarded by the Panel in the sanctions decision included amounts that were not recoverable pursuant to the Securities Act. In the alternative, it is submitted that the Panel failed to determine what portion of the costs sought by the respondent included amounts that were not recoverable.

[116] I agree with the respondent that in asserting the Panel awarded unrecoverable costs, the appellants misconstrue the decision. In discussing the percentage difference between incurred and claimed costs (i.e., any ‘discount’), the Panel simply observed that some incurred costs were likely not recoverable. Neither the costs claimed, nor ordered, included unrecoverable amounts.

[117] I see no grounds to interfere with the costs decision.

I. DISPOSITION

[118] The appeal is dismissed.

[119] As agreed to by the parties, the appellants will pay the respondent $15,000 all-inclusive in costs.

Nakatsuru J. I agree

N. Backhouse J.

I agree:

S. O’Brien J.

Released: November 7, 2025

[^1]: These findings have not been appealed.

[^2]: To be clear, Cryptobontix and Arbitrade Bermuda have not appealed.

[^3]: This decision was released after the Panel heard the evidence of Mr. Hogg’s compelled interviews.

[^4]: Paragraph 65 of the Merits Decision states where the tokens were sold. Paragraphs 67-68 outline generally how the tokens were sold. Paragraph 74 outlines the approximate number of tokens sold between May 2017 and November 2018. Paragraphs 71-73 outline the representations made in a chronology.

[^5]: Paragraph 117.