Court File and Parties

Court File No.: CV-24-00720464-0000
Date: 2025-05-26
Ontario Superior Court of Justice

Between:
Hao Chen, 1000709589 Ontario Inc., Mengqi Zhang, and Michael Wu, Plaintiffs
– and –
Masih Moazen-Safaei, Atlas Cloud Mining Inc., Farhad Eshfagh, 1000743019 Ontario Inc., Novin Commercial Exchange Inc., Mohammad Moazen Safaei, Sepideh Hamedinejad, Galaxy Trust Advanced International Inc., and Mohammadshahab Daeizadeh Kashan, Defendants

Appearances:
Benjamin Bathgate and Jessica Stansfield, for the Plaintiffs
Irvin Schein and Amelia Phillips Robbins, for the Defendants Masih Moazen-Safaei, Atlas Cloud Mining Inc., 1000743019 Ontario Inc., Novin Commercial Exchange Inc., Mohammad Moazen Safaei, Sepideh Hamedinejad, Galaxy Trust Advanced International Inc., and Mohammadshahab Daeizadeh Kashan
Howard Manis, for the Defendant Farhad Eshfagh

Heard: November 29, December 19, 2024 and January 29, 2025

Reasons for Decision
Callaghan J.

Introduction

[1] The plaintiffs obtained an ex parte Mareva order, Norwich order and Preservation order dated June 5, 2024 (collectively the “Order”) as against Masih Moazen-Safaei (“Masih”), Atlas Cloud Mining Inc. (“ACM”), Farhad Eshfagh (“Farhad”), 1000743019 Ontario Inc. (“‘019”), Novin Commercial Exchange Inc. (“Novin”), and Galaxy Trust Advanced International Inc. (“Galaxy”) (collectively, the “Mareva Defendants”). Although requested, the Order did not extend to the other defendants.

[2] The Mareva Defendants seek to set aside the Mareva Order and set aside or vary the preservation Order[^1]. They assert that the plaintiffs did not make full and frank disclosure in obtaining the ex parte Order. The Mareva Defendants further submit that, in any event, the Order should not continue. Farhad was separately represented and submits that even if the Order should continue against the others, it ought to be dismissed as against him. The plaintiffs say the Order should continue against all the Mareva Defendants.

[3] For the reasons that follow, the Order shall continue but the Mareva shall not continue against Farhad.

Background

Parties

[4] This action relates to a business venture between the plaintiffs, Hao Chen (“Chen”)[^2] and Michael Wu (“Wu”) and the defendant, Masih. The three are shareholders in ACM. ACM was created to mine cryptocurrency. Masih was the CEO of ACM.

[5] Farhad is Masih’s trusted friend. He was retained as the COO of ACM.

[6] The defendant, Novin Commercial Exchange Inc. (“Novin”), was Masih’s business partner prior to meeting the plaintiffs. The defendant, Mohammad Moazen Safaei (“Mohammad”), is Masih’s father. The defendant, Sepideh Hamedinejad (“Sepideh”), is Masih’s friend and ACM’s real estate agent. The defendant, Mohammadshahab Daeizadeh Kashan (“Shahab”), is Sepideh’s husband and the owner of Galaxy, a money exchange company. The defendant, ‘019, is a shell corporation established by ACM’s shareholders in order to secure a lease at a premises in Barrie where computers would mine for cryptocurrency (the “Barrie Mining Site”).

[7] While not a party, Wu’s wife, Jacqueline Hsieh (“Jacqueline”), is a Chartered Professional Accountant (“CPA”) who assisted Wu in respect of ACM.

ACM

[8] As mentioned, ACM was incorporated to mine cryptocurrency. ACM was a start-up company.

[9] Cryptocurrency mining is a process whereby computers, using specialized software and configurations, are used to validate and verify the accuracy of a cryptocurrency blockchain or transaction ledgers. Bitcoin can be earned as rewards for the work performed by these computers validating and verifying the ledgers. This is the exercise known as ‘mining’ cryptocurrency. The computers used for this purpose are referred to as cryptocurrency mining machines (“Miners”).

[10] Masih’s experience with cryptocurrency was derived through his business, Novin, which was involved in cryptocurrency trading. He has owned and operated Miners since 2017 but not on the scale contemplated with ACM. Through Novin, Masih was accredited by the province to provide educational courses on digital assets and cryptocurrency. Masih was also a director of Galaxy, a currency/crypto exchange platform.

[11] As CEO and COO, Masih and Farhad operated ACM on a day-to-day basis. As ACM was in the start-up phase, there was much work to be done, including acquiring an appropriate location for the business, and acquiring Miners and the necessary equipment to make the Miners operational. Wu and Chen were investors and were not intended to be involved in the day-to-day operations. They relied on Masih’s experience in the cryptocurrency space.

[12] The Unanimous Shareholders Agreement (“USA”) provided that each shareholder would own 33.3% of ACM. Each would acquire 1,000 shares at a value of $6,166 per share. These contributions have been described as “Investment Payments”. The Investment Payments were used to purchase equipment. Chen and Wu were directed by Masih how and where to send funds. Some funds were sent via cryptocurrency, some funds were directed to various cryptocurrency wallets or accounts, and some funds were directed to suppliers. For example, Chen says Masih had arranged for him to send approximately $1,349,410.40 CAD (in Chinese and US currency) directly to Chinese intermediaries from whom ACM was to acquire Miners. Similarly, at the direction of Masih, Wu made his initial Investment Payment in cryptocurrency to a cryptocurrency wallet controlled by Masih. Other funds were directed to be paid to Masih’s wallet but with the understanding that the money would be used to buy Miners and HVAC equipment for ACM.

[13] A portion of the Investment Payments from Chen and Wu is alleged to have been misappropriated. They collectively contributed over $12 million, being the amount stipulated in the USA. The funds were advanced in stages. Masih has testified that he “deposited the investment payments into [his] accounts and/or the accounts of friends and family that [he] trusts. These accounts included the accounts belonging to Novin, [his] father, [Masih], and whoever [he] could find that [he] could trust to deposit funds to be transferred later into ACM’s account.” Masih also stated he used Galaxy “depending on the rates it could offer ACM”, instead of other grey market exchanges to convert Wu’s cryptocurrency.

[14] In contrast, it is clear that Masih has not made the full $6.166 million of Investment Payments. Masih says he has made some payments for the purchase of equipment, such as Miners. The purchase of this equipment is shrouded in some mystery. Masih says the payments for this equipment were made via an unverified Iranian credit account. Masih states that he had a credit line secured by property in Iran. He claims it was through this facility that he arranged payments for equipment. Masih has not produced any underlying documents relating to this credit facility or disclosed the identity of the creditor. He expresses security concerns given the creditor is in Iran and the fact that there are economic sanctions against Iran. Given the lack of disclosure, it is still far from clear what, if anything, Masih has contributed by way of Investment Payments to ACM.

[15] Notwithstanding the lack of proof of contributions, both Masih and Farhad had advised the plaintiffs that Masih had contributed his anticipated Investment Payments. On the understanding that each shareholder was contributing equally, the plaintiffs continued to advance the balance of their Investment Payments.

[16] As mentioned, the Investment Payments were to be used to purchase equipment for the Mining Business and to rent space where the Miners would be located. The Miners are costly computers. They utilize significant energy and must be housed in space that is climate controlled which, in turn, requires costly HVAC equipment.

[17] The plaintiffs allege that Masih represented that the Investment Payments were to fund the purchase of 1,500 Miners and both Masih and Farhad had advised that there had been significant purchases and deliveries of Miners. In fact, significantly less than 1,500 Miners were ever purchased and delivered. Moreover, it was represented by Masih and Farhad that Investment Payments were used to contract for the costly HVAC equipment that was never delivered.

[18] In short, the plaintiffs contend that the Investment Payments were not used for ACM as intended, that Masih and Farhad misrepresented how the Investment Payments were used and that the Investment Payments are unaccounted for. It is also alleged that each investor was to contribute the same amount to ACM, and that Masih and Farhad represented that Masih had contributed the same amount as Chen and Wu but, in fact, Masih has contributed little or nothing to ACM.

[19] Since the issuance of the Order, ACM has made an assignment into bankruptcy with MNP Ltd. acting as receiver (the “Receiver”).

The Order

[20] The Order issued by me granted a Mareva against only the Mareva Defendants. The Order also included a preservation order regarding certain assets of ACM, described as being “the Miners and the cryptocurrency equipment, including decentralized, hot, or cold storage wallets, accounts or addresses, for storage of cryptocurrency awarded from or transacted with respect to the mining, and all their contents, all of which constitutes the real value of ACM’s Mining Business”. To the extent that the whereabouts of these assets are known, they are now under the control of the Receiver.

[21] The Order also granted a Norwich order requiring production by specified Canadian banks and cryptocurrency exchanges of records relating to the Mareva Defendants. Documents have been produced in response to the Order. There is no relief sought in the notice of motion relating to the Norwich portion of the Order.

[22] The Order was made ex parte. Like all ex parte Mareva orders, the motion was brought with some urgency to prevent the dissipation of assets. In the absence of the defendants, the plaintiffs were obligated to provide full and frank disclosure to the court.

[23] Brief reasons were issued explaining the rationale for the Order. The reasons reviewed the applicable tests for each type of order sought. Each order required the plaintiffs to establish that they had advanced a claim of some merit. In the case of the Mareva, the plaintiffs had to establish a strong prima facie case. The Norwich order required a bona fide claim and the preservation required there to be a serious issue raised. While each test is slightly different, a strong prima facie case would meet the other two standards.

[24] Although several grounds were advanced by the plaintiffs, the reasons focused on the claim of civil fraud. Without repeating those reasons here, I found that the plaintiffs had made out a strong prima facie case for fraudulent misrepresentation, particularly as it related to the Miners. Based on the evidence, I concluded:

The above facts are sufficient to establish the five elements of civil fraud. There was representation that ACM would purchase 1500 Miners. The Plaintiffs advanced money on that basis. There is no evidence that 1500 Miners were received. The HKJF and Larylan invoices have the smell of fraud to them. Neither entity could be satisfactorily verified. The Plaintiffs were cut off the APP when they complained. The general ledger does not accord with the invoices. Only 175 Miners have ever been seen by the Plaintiffs. The Plaintiffs have not received satisfactory answers as to the whereabouts of the rest, if they exist. The APP that was to track the production of the Miners showed that only 75 Miners were operating on ACM’s account. Finally, the movement of the limited amount of cryptocurrency earned by the Miners appears to have been moved out of ACM.

[25] The legal test to obtain a Mareva required the plaintiffs to establish a serious risk that the Mareva Defendants would remove property or dissipate assets before judgment. Based on my conclusion that there was a strong prima facie case of fraudulent misrepresentation, I inferred that assets would likely be dissipated. In accepting that this was an appropriate case to apply the inference, I stated:

In this case, millions of Investment Payments have been supposedly spent on Miners and yet it is not apparent that 1500 Miners were bought. The invoices are of dubious origin. What little cryptocurrency that has been earned has ended up moving outside ACM. All of which raises a real concern that the Investment Payments were not used for ACM’s operations but have been used for another purpose. In such circumstances, it seems highly likely that any remaining assets may be dissipated.

[26] Finally, I concluded that there was irreparable harm due to the risk of dissipation and that the balance of convenience favoured the issuance of the Mareva order.

[27] The preservation order and Norwich order relied upon the above conclusions regarding the strength of the claim by the plaintiffs.

Material Non-Disclosure

[28] Having moved ex parte, the plaintiffs were required to “make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion”: rule 39.01(6), Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The Mareva Defendants submit that the plaintiffs failed in their obligation to make full and frank disclosure.

[29] Sharpe J. (as he then was) described the duty to make full and frank disclosure on a party moving ex parte in United States v. Friedland, [1996] O.J. No. 4399 (Gen. Div.), at paras. 27-28, as follows:

That party is not entitled to present only its side of the case in the best possible light, as it would if the other side were present. Rather, it is incumbent on the moving party to make a balanced presentation of the facts [and] law. The moving party must state its own case fairly and must inform the Court of any points of fact or law known to it which favour the other side. The duty of full and frank disclosure is required to mitigate the obvious risk of injustice inherent in any situation where a Judge is asked to grant an order without hearing from the other side.

If the party seeking ex parte relief fails to abide by this duty to make full and frank disclosure by omitting or misrepresenting material facts, the opposite party is entitled to have the injunction set aside. That is the price the Plaintiff must pay for failure to live up to the duty imposed by the law. Were it otherwise, the duty would be empty and the law would be powerless to protect the absent party.

[30] However, the requirement is neither intended to be a standard of perfection nor is it to be applied mechanically. As Justice Sharpe went on to say, “mere imperfections in the affidavit or because inconsequential facts have not been disclosed” does not necessarily amount to a breach of r. 39.01(6): Friedland, at para. 31; Waters Estate v. Henry, 2022 ONSC 5485, at para. 45.

[31] As observed by Justice Centa in Waters Estate at para. 47: “the test on whether to set aside an ex parte order for non-disclosure of material facts is whether the omitted disclosure might have had an impact on the original order being made …”.

[32] As such, not all non-disclosure, misstatements, over-statements, or exclusions will be material such that they warrant setting aside the impugned order. Rather, any misstatement, over-statement or exclusion must impact the reason for granting the order. Of course, the court must scrutinize the alleged non-disclosure not only because the rule requires it, but because the integrity of the ex parte process is dependent on full and frank disclosure. It is a sound rule that ensures the court is not misled in circumstances where the rigours of the adversarial process are not present.

[33] The focus is on the plaintiffs’ knowledge at that time of obtaining the Order and whether there was material non-disclosure that would have impacted the decision at that time. Since obtaining the Order, there have been documents produced because of the Norwich order. More affidavits have been filed and cross-examinations have taken place. There is a great deal more information now than there was when the Order was obtained. It is important not to conflate what was known or even knowable at the time of the ex parte motion and what is now known. By now, with more disclosure, there is more clarity than there was previously. The assessment as to whether there was full and frank disclosure is what the plaintiff knew or ought to reasonably have become aware of for the purpose of the motion and whether, in all the circumstances, the information was presented fairly to the court on the ex parte motion.

[34] In this case, the Mareva Defendants take issue with over 17 statements made by the plaintiffs that they say constitute misstatements or omissions. They have provided detailed references to the extensive volume of material, including the cross-examinations, in support of their arguments. The plaintiffs have responded explaining why the alleged misstatements or omissions are neither misstatements nor omissions and, in any event, are not material such that they would impact the outcome of the ex parte motion.

[35] I have been through all the statements and all the evidentiary references provided. I do not propose to review each alleged misstatement or omission. I agree with the plaintiffs that the alleged misstatements and omissions are either overstated or not material. In addition, I do not believe that the alleged statements or omissions, even if accurate, would have impacted my decision in arriving at the Order.

[36] For example, the Mareva Defendants submit that Wu misrepresented his experience in the cryptocurrency industry so as to create the appearance that the plaintiffs were solely reliant on Masih. It is accurate to say the plaintiffs relied on this knowledge imbalance in arguing in support of the ex parte motion. However, in my view, Wu did not misstate his experience in the field of mining cryptocurrency and the plaintiffs’ presentation on the ex parte motion was neither unfair nor misleading.

[37] Masih does have significantly more experience than the plaintiffs in the crypto space, including in mining for cryptocurrency. Wu’s experience is limited to investing in cryptocurrency and investigating another possible investment in crypto-related business. I agree with the plaintiffs’ counsel that investing in cryptocurrency or investigating an investment does not constitute any meaningful experience in the mining of cryptocurrency. In contrast, Masih was in the cryptocurrency world, he has been involved in mining of cryptocurrency and it was through his knowledge and contacts that ACM was planning to succeed. Indeed, Masih used his contacts from his prior experience and contacts when seeking to acquire the necessary equipment for ACM. In my view, there was an appreciable difference in the knowledge between Masih and the plaintiffs which, in part, was why the plaintiffs entered into the venture.

[38] Moreover, the reasons for the Order were not predicated on the knowledge imbalance regarding the cryptocurrency industry. The reasons for granting the Mareva related to the representations made by Masih and Farhad about the purchase of Miners and HVAC equipment, the lack of evidence that the representations were true and the inability to account for the $12 million invested by the plaintiffs.

[39] The Mareva Defendants also submit that the plaintiffs created an unfair impression of Masih, in part, by Chen asserting that Masih was only depositing amounts less than $10,000 in ACM’s accounts. The Mareva Defendants assert that the plaintiffs knew and agreed that ACM would only deposit amounts less than $10,000 because the bank was uncomfortable in dealing with a business in the cryptocurrency space and smaller deposits would attract less attention. The Mareva Defendants state that “the plaintiffs knew smaller transactions were planned in order to protect ACM's CIBC account from being closed.” In my view, this point was made by the plaintiffs at the ex parte motion. In his affidavit, Chen disclosed that Masih had told the plaintiffs that he could only deposit “small amounts [in] the [ACM’s] CIBC account so it [would] not result in further concerns for CIBC”. While I accept that it was explained more clearly and more fully on the return motion that conventional banks were wary of crypto businesses hence the decision to deposit small amounts, the disclosure on the ex parte motion was not inadequate or misleading. Moreover, the additional detail on the return motion would not have altered the reasons for granting the Mareva order.

[40] As noted in the ex parte reasons, Masih represented that 1500 Miners were purchased by ACM but the plaintiffs saw no more than 175 Miners. The Miners were said to be stored at the Beaver Creek office. It is suggested by the Mareva Defendants that the ex parte motion material misrepresented that no Miners could be seen due to the stairs being broken which led the plaintiffs to believe that there were fewer Miners at the Beaver Creek office being used for ACM’s benefit. At the return motion, the Mareva Defendants produced a video showing the plaintiffs and their wives going up a set of broken stairs to where the Miners were stored, apparently in boxes. It is suggested that the plaintiffs misrepresented this viewing of the Miners. I disagree. The ex parte motion material clearly states that the Miners were stored in an upstairs location at ACM’s Beaver Creek office. The stairs were indeed broken. The key portion of the evidence was that what the plaintiffs “saw could not possibly contain anywhere near 1500 Miners”. I do not read the ex parte material as containing a misrepresentation or omission. Rather, the ex parte material described a facility with stairs in some disrepair but that the plaintiffs only viewed a small number of Miners when they were led to believe there were many more Miners. This continues to be so. In any event, the manner of the viewing is not the essential fact. Rather, the essential fact is that the plaintiffs never saw anything close to 1,500 Miners when they visited the ACM site, and that fact is not disputed.[^3]

[41] The Mareva Defendants take issue with the evidence that Masih and Farhad terminated a lease to the Engelhard property resulting in the loss of the leasehold improvements to that property. The Mareva Defendants assert that Chen did not disclose on the ex parte motion that the plaintiffs also agreed to terminate that lease. Again, I do not read Chen’s affidavit on the ex parte motion as containing a misrepresentation. Chen’s ex parte affidavit clearly refers to Masih and Farhad recommending that the Engelhard lease should be terminated. The affidavit goes on to say, “I reluctantly accepted the recommendation.” There was nothing misleading about this evidence.

[42] The Mareva Defendants assert that the plaintiffs failed to advise on the ex parte motion that they had access to ACM’s financial accounts and that the material filed on the ex parte motion in this regard was incomplete. I disagree. The plaintiffs disclosed on the ex parte motion that they had access to ACM’s QuickBook accounting system. I accept that more detail was disclosed on the return motion as to what was made of the accounting by the plaintiffs and Jacqueline. However, the material issue for the ex parte motion was that the accounting records of ACM did not support either that ACM had acquired 1,500 Miners or the HVAC to support those Miners. In addition, the accounting records did not accord with the representations that Masih had made his Investment Payments or where the plaintiff’s money was ultimately spent.

[43] The Mareva Defendants submit that the plaintiffs testified on the ex parte motion that they were unaware of Novin being involved in the ACM business. The Mareva Defendants state that the plaintiffs were aware that ACM was utilizing its “office space, credit, tax benefits, its bank accounts and its goodwill” of Novin.

[44] The evidence on the ex parte motion made it clear that the plaintiffs were aware that Masih registered an ACM account using his Novin email address. The affidavits on the ex parte motion also make it clear that Novin’s office space was being used on a temporary basis to store Miners. As such, the plaintiffs made no misrepresentation in this regard.

[45] On the ex parte motion, the plaintiffs testified that they “suspect that the Bitcoin from ACM’s Account has been transferred to the accounts of Masih, Eshfagh, Novin and/or Galaxy, for their use”. This was clearly not stated as a fact but a supposition. This appears to have been a correct deduction. Masih testified that Novin’s bank account, along with others, was used to receive Investment Payments. This was not known by the plaintiffs at the time of the ex parte motion and not mentioning it was not a misrepresentation. On the issue of tax benefits being provided to ACM by Novin, this is the evidence of Masih. The plaintiffs describe Masih’s evidence as “self-serving”. On the record before me, there is insufficient evidence that this fact (assuming it is correct) was known by the plaintiffs. As such, in my view there was no material misrepresentation as to the plaintiffs’ knowledge of Novin’s involvement at the time of the ex parte motion. The relationship between Novin and ACM was sufficiently outlined in the ex parte material that this Court was not misled.

[46] As stated, the above are some of the examples of the alleged non-disclosure. The plaintiffs have addressed each concern raised by the Mareva Defendants. Having reviewed each allegation and corresponding response, I am satisfied that none of the concerns raised could be said to be a breach of the obligation to provide full and frank disclosure. In particular, none of the alleged misstatements could be said to impact the central issue of where the plaintiff’s Investment Payments went or how that money was spent or otherwise moved between the Mareva Defendants’ various accounts.

[47] Moreover, there was nothing unfair about how the ex parte motion was presented. Based on the facts known at the time, the presentation by the plaintiffs did not breach their obligation to fairly present the evidence.

De Novo Hearing

[48] The Mareva Defendants request that now that they have had an opportunity to respond to the ex parte motion, the court should conduct a de novo inquiry as to whether the plaintiffs meet the test for a Mareva injunction.

[49] In O2 Electronics Inc. v. Sualim, 2014 ONSC 5050, at para. 67, Perell J. set out the test relating to Mareva injunctions as follows:

For a Mareva injunction, the moving party must establish: (1) a strong prima facie case; (2) that the defendant has assets in the jurisdiction; and (3) that there is a serious risk that the defendant will remove property or dissipate assets before the judgment. A Mareva injunction should be issued only if it is shown that the defendant's purpose is to remove his or her assets from the jurisdiction to avoid judgment. The moving party must also establish that he or she would suffer irreparable harm if the injunction were not granted and that the balance of convenience favours granting the injunction.

Strong Prima Facie Case

[50] A strong prima facie case does not require the plaintiff to prove its case. Rather, the court must be satisfied that “upon a preliminary review of the case, the application judge must be satisfied that there is a strong likelihood on the law and the evidence presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the originating notice”: R. v. Canadian Broadcasting Corp., 2018 SCC 5, para. 17.

[51] As I did with respect to the Order, I will focus on the claim for civil fraud. As I noted in the ex parte reasons, the test for civil fraud was set out as follows by the Ontario Court of Appeal in Paulus v. Fleury, 2018 ONCA 1072, paras. 8-9:

(i) a false representation of fact by the defendant to the plaintiff;
(ii) knowledge the representation was false, absence of belief in its truth, or recklessness as to its truth;
(iii) an intention the plaintiff act in reliance on the representation;
(iv) the plaintiff acts on the representation; and
(v) the plaintiff suffers a loss in doing so.

[52] The plaintiffs claim that Masih and Farhad fraudulently misrepresented that each of the shareholders were equal co-investors and that they had invested the same amount of Investment Payments. The plaintiffs have invested $12,715,000 by way of direct payments of funds and cryptocurrency to be used for ACM’s operations, including to acquire Miners and HVAC equipment. The plaintiffs did so on the understanding that Masih had also invested an equal amount as required by the USA.

[53] Both Farhad and Masih represented that Masih had contributed the same amounts as the plaintiffs. For example, Farhad prepared a reconciliation ledger showing that each of the three shareholders had paid up capital of the same amount. In providing the reconciliation ledger, Farhad wrote “confirming that all three partners have paid their commitment equally”. On another occasion, when discussing the Miners, Farhad wrote to the shareholders that “we need to inject $600,000 to our account… So, each partner share to deposit at this moment will be $3,556,996 /3= $1,185,665.33. Please go ahead and deposit”. This was never corrected by Masih. In a tape-recorded call, Masih told Jacqueline that each shareholder invested $6,000,000.

[54] Masih now says that he has contributed $1.1 million, not $6.116 million. When asked about how he made these contributions, his answers were vague. He said his payments were transferred to an account “in favour” of ACM. When asked what “in favour” of an account meant, he said he would have to check. He has yet to provide a satisfactory answer as to what contributions he made and where he made them. In part, he relied on the mysterious Iranian credit facility. He has yet to provide any proof that this credit facility exists or, if it does, was used to acquire equipment for ACM.

[55] In my view, there is a strong prima facie case that Masih represented that each shareholder would contribute the same amount and that he and Farhad represented that each shareholder had contributed the same amount when, in fact, it was not so.

[56] There is a strong likelihood that the statements that Masih had contributed the same amount as the others were false and that they were made either knowingly or recklessly. There is a strong prima facie case that the plaintiffs relied upon this representation to make what they thought were equal contributions to ACM.

[57] It was represented by Masih that ACM had bought 1,500 Miners with the Investment Payments. It is confirmed that ACM only purchased 841 Miners. Masih, in cross-examination, conceded that “he did the wrong thing” and gave the plaintiffs the impression that “1500 Miners had been delivered”. Even knowing that he had erroneously led the plaintiffs to understand that ACM acquired 1,500 Miners, he took no steps to disavow them of this misrepresentation. He has yet to produce an invoice for what he purchased. In my view, the representation by Masih that ACM purchased 1,500 Miners was necessary to ensure that the plaintiffs continued advancing the Investment Payments, which they did.

[58] In the case of Farhad, he prepared a spreadsheet showing that 1,500 Miners were delivered to ACM. Farhad wrote to the plaintiffs in January 2023 that “500 machines will arrive next week in Novin warehouse”. Although he initially denied knowing about the delivery of the Miners, he later admitted that he was there when the Miners were delivered to Novin’s office. Farhad represented that ACM had acquired more Miners than what in fact had been either paid for or delivered. It is now acknowledged that there were never more than 841 Miners acquired. As the COO, there is a strong likelihood that Farhad either knowingly misstated the facts or was reckless in doing so. In either case, there is a strong prima facie case of fraudulent misrepresentation.

[59] In addition, unknown at the time of the Order, after the plaintiffs inquired about the Miners, Masih had arranged to move 330 Miners from Novin’s office to the CEO of Novin’s parents’ basement. Two days after obtaining the Order, Masih had another 333 Miners moved from Novin’s office to a storage unit. This conduct suggests that Masih was seeking to ensure the Miners that were acquired would not end up in the hands of the plaintiffs.

[60] On the ex parte motion, invoices were produced from supposed suppliers of the Miners and the HVAC equipment, being HKJF and Larylan. The invoices were suspicious and they were subject to comment in the ex parte reasons. Masih explained that he was dealing with a broker in China, who he described as the “supplier” who worked with HKJF, Larylan and another entity known as Petrofuture. There were many questions left unanswered as to this “supplier”, including the identity of the “person from the supplier” who Farhad and Masih dealt with to negotiate the alleged purchases.

[61] On the return of the motion, Masih’s evidence was that he had set up a credit line with the Iranian credit facility entity which he says he would use to pay HKJF and Larylan to acquire the Miners and HVAC equipment. The line of credit is said to be $4 million. The line of credit is said to be secured by property in Iran. By purchasing this equipment through the line of credit, Masih states that he was advancing his Investment Payments. However, no equipment appears to have been provided.

[62] Masih did not disclose to the plaintiffs that he intended to use this Iranian credit facility to acquire equipment which would be credited toward his Investment Payments. As mentioned, when asked for details regarding this supposed credit facility, such as the name of the Iranian entity supplying the credit, Masih refused to do so, citing security reasons and Canadian sanctions on Iran.

[63] The plaintiffs understandably do not accept there is a credit facility. In the absence of any documentary or collaborative proof, it is hard to accept the evidence of Masih on this point. This supposed credit arrangement to purchase Miners and HVAC equipment as part of Masih’s Investment Payments only heightens the strong prima facie case.

[64] The plaintiffs discovered that HKJF was dissolved in February 2024, being the same time frame that the plaintiffs were pressing for supporting invoices for the Miners and HVAC purchases. Despite the dissolution of the supplier, Masih and Farhad pressed the Plaintiffs to pay more money to buy Miners from these unknown suppliers. The Plaintiffs also discovered that the Hong Kong Government Companies Registry took disciplinary actions against the corporate secretaries of HKJF and Larylan for breaches of the Anti-Money Laundering and Counter-Terrorist Finance Ordinance in January and February 2024.

[65] There is insufficient credible proof at this time that HJKF and Larylan are or ever were genuine suppliers or that there is an Iranian entity providing credit to Masih to acquire equipment or finance his Investment Payment. It may well be that a trial evidence will be adduced that establishes these facts but, at this stage, there is a strong prima facie case that the representations by Masih that he was acquiring Miners and HVAC equipment using an Iranian credit facility were not true.

[66] In my view, the de novo hearing raised more evidence that supports a strong prima facie case of fraudulent misrepresentation as it relates to the acquisition of the Miners and the HVAC equipment.

[67] In my view, there is a strong prima facie case that Masih and Farhad represented to the plaintiffs that ACM had acquired or ordered 1,500 Miners and corresponding HVAC equipment. Notwithstanding these representations, 1,500 Miners and corresponding HVAC were not acquired. In addition, Masih and Farhad represented that Masih had contributed an equal amount of Investment Payments as Wu and Chen. This too was false. Moreover, there has yet to be sufficient proof as to what has happened to the plaintiffs’ Investment Payments of some $12 million. In my view, this evidence is sufficient to establish a strong prima facie case that the plaintiffs were induced to advance over $12 million toward ACM on the representation that Masih would contribute an equal amount and that the funds were used to purchase Miners and HVAC equipment.

[68] There was further evidence establishing the flow of Investment Funds into accounts controlled by Masih and others, including Novin and Galaxy. Masih testified that he directed the plaintiffs’ Investment Payments to several accounts of several persons or entities, including Novin. He says he would then redirect the funds to ACM. There is no apparent accounting or evidence where the money from Wu’s Investment Payments ultimately went thereafter.

[69] Galaxy also received a portion of the plaintiffs’ Investment Payments. Masih testified he used Galaxy “sporadically” when “it could provide the best rate when compared to the grey market dealers.” The Norwich records, in combination with the Plaintiffs’ expert report, show that Masih used the Binance cryptocurrency account of Galaxy to receive $2.07 million USDT from Wu. The account was opened using Sahib’s identification who, along with Masih, was a director of Galaxy. Sahib said he was unable to confirm the account was controlled by him, although he conceded that ACM and Masih used Galaxy currency exchange services. In the absence of an explanation as to how or why Masih is transferring $2.07 million to Galaxy’s account, there is a strong inference to be drawn that the $2.07 million is the Investment Payments by Wu provided to Masih which were transferred to the undisclosed Galaxy account.

[70] The Investment Payments that appear to have ended up in accounts controlled by Novin and Galaxy create a strong prima facie case that those accounts were used to receive funds that were acquired by Masih through the fraudulent misrepresentations.

[71] It was argued by Farhad’s counsel that he was not involved at the same level as Masih and that he took instructions from Masih as to the information he conveyed. As previously noted, Farhad made false representations about the acquisition of Miners and HVAC equipment and Masih’s Investment Payments that are at the heart of this case. As the COO, it is difficult to understand how he did not know that the information given to the plaintiffs was false. As COO he ought to have known the true state of the acquisitions and the Investment Payments. At the very least, his communication was reckless which is sufficient for the plaintiffs to meet the burden of establishing fraudulent misrepresentation and a strong prima facie case.

[72] To be clear, the plaintiffs raise other claims, such as conspiracy and unjust enrichment. In my view, the above is sufficient to establish a strong prima facie case against the Mareva Defendants and support the continuation of the Mareva, subject to the remainder of the test being satisfied.

Risk of Dissipation or Removal

[73] Proof of the risk of removal or dissipation of assets may be inferred from the surrounding circumstances of the responding parties’ misconduct: OPFFA v. Atkinson, 2019 ONSC 3877, at paras. 6-8, quoting with approval from Sibley & Associates LP v. Ross, 2011 ONSC 2951, para. 63, and Amphenol Canada Corp. v. Sunadrum, 2019 ONSC 849. In that regard, the plaintiffs are not obligated to adduce evidence showing that the defendants are actively dissipating their assets, but rather it must be established that there is a serious risk without the granting of the order that assets may be removed from the jurisdiction and, such proof may be inferred from the finding of a strong prima facie case of fraud.

[74] The circumstances in this case create a sufficient inference that there is a serious risk that funds that may exist could well be put beyond the reach of this Court. This is a case where the evidence of fraudulent misrepresentation and the lack of clarity of the flow of funds support the conclusion that there is a serious risk that assets will be dissipated.

[75] Aside from the inference, the movement of money through various cryptocurrency accounts makes the likelihood that any assets that might now exist may be easily dissipated. As noted, the plaintiffs have filed an expert’s report that supports that the Investment Payments went into cryptocurrency accounts controlled by Masih or companies with which he is associated, including Novin. Funds also flowed through Galaxy. Questions asked to Masih regarding these accounts were not satisfactorily answered, which heightens the concern.

[76] As I stated in the ex parte reasons, this case is much like McRae-Yu v. Profitly Inc., 2024 ONSC 1593, para. 41, where a Mareva injunction relating to cryptocurrency was upheld, with the court stating that “a strong prima facie case of fraudulent misrepresentation” is sufficient to “find that the defendants are very likely to attempt to dissipate the remaining assets or remove them from the jurisdiction.” That sentiment applies here as it relates to Masih, Novin, Galaxy and the two companies, ACM and ‘019: Li et al. v. Barber et al., 2022 ONSC 1176, paras. 22-26.

[77] In the case of Farhad, I am not satisfied that it has been demonstrated that he has or will dissipate assets. The inference that may be drawn is not automatic. Rather, the nature of the fraud must be considered in drawing the inference. As Justice Strathy (as he then was) noted, the inference may be drawn from “all the circumstances, including the circumstances of the fraud itself, demonstrate a serious risk that the defendant will attempt to dissipate assets or put them beyond the reach of the plaintiff [emphasis added]”: Sibley & Associates LP v. Ross, 2011 ONSC 2951, para. 63. A Mareva injunction is an extraordinary remedy. It ties up a person’s assets until trial and for that reason can visit considerable hardship on those who are subject to the order. The court must be vigilant to ensure that a Mareva continues only where it is truly appropriate and warranted. As such, as Justice Strathy points out, the inference is not to be drawn without regard to the circumstances of the fraud itself.

[78] The evidence does not establish that Farhad was involved in processing the Investment Payments or the payments made by or on behalf of ACM. The money at issue was moved by Masih using, in part, accounts and facilities of Galaxy and Novin. While Farhad made statements that were deliberately or recklessly false, the evidence is not sufficient for me to conclude that he was involved in the movement of funds. As such, I decline to infer that Farhad will dissipate his assets simply because there is as strong prima facie case of fraudulent misrepresentation. There is also insufficient direct evidence to conclude that he is dissipating assets. The plaintiffs have identified funds flowing to Novin from Farhad, but this is consistent with his investment in Novin and does not allow me to conclude he is dissipating his assets or putting them beyond the reach of the court.

Balance of Convenience

[79] The balance of convenience weighs the relative positions of the parties if the order is or is not granted. Given that I have found that there is a strong prima facie case and the likelihood of assets being dissipated, the balance weighs heavily in favour of the plaintiffs: OPFFA v. Paul Atkinson et al, 2019 ONSC 3877, para. 19.

[80] The Mareva Defendants state that any assets that might have existed belonging to ACM are now under the control of the Receiver. There is no doubt that those identifiable and locatable assets of ACM are under the control of the Receiver. They say this fact weighs in favour of not continuing the Order as it will adversely impact the Receiver.

[81] This Court has already issued a consent order that the Receiver is to “sell, remove, move, transact, or similarly deal with any funds or assets of [ACM]” which effectively exempts the receiver from the Mareva order in dealing with ACM’s assets (the “Exemption Order”). That Exemption Order provides that the Mareva order otherwise continues. As such, the existence of the Receiver does not impede the court’s ability to issue a Mareva, as the Receiver is still empowered to perform its duties. Accordingly, the involvement of the Receiver does not move the balance of convenience in favour of the Mareva Defendants. I would add that the Receiver is aware of this proceeding and has taken no position.

[82] There was no persuasive argument that the balance of convenience favours the Mareva Defendants.

Conclusion on Mareva Order

[83] Based on the above, the Mareva Order will continue against the Mareva Defendants with the exception of Farhad.

Preservation Order

[84] On the issue of the preservation portion of the Order, it was argued it should fall with the Mareva order because it was based on the same facts as the Mareva order. As I have found that the Mareva order stands, there is no factual basis why the preservation order should also not be maintained. The Mareva Defendants further submitted that as there is a receiver for ACM, there is no basis to maintain a preservation order. I disagree. The preservation order ensures that any assets that may exist are not disposed of by others. The preservation order does not impact the Receiver’s ability to dispose of ACM’s assets.

[85] As to Farhad, while I have not found that he had control of the flow of funds, I see nothing inconsistent in his requirement as the former COO to preserve any assets that might be directly or indirectly under his control and as such that portion of the Order will continue to apply to him.

[86] The notice of motion did not seek to set aside the Norwich order. However, it was suggested in argument that it ought to be set aside. There is similarly no basis to set aside the Norwich order. The information obtained was not otherwise available to the plaintiffs and I find nothing improper in their use of that information.

Disposition

[87] The motion by the Mareva Defendants is dismissed with the exception that the Mareva order will not continue as against Farhad.

[88] As to costs, any party seeking costs shall serve and file costs submissions of no more than 5 pages within 14 days of the receipt of this decision. Any responding submissions of no more than 5 pages shall be served and filed 7 days after receipt of the requesting submissions. Reply submissions of no more than 3 pages may be filed within 3 days of receipt of the responding submissions.

Callaghan J.
Released: May 26, 2025

[^1]: The Mareva Defendants’ notice of motion only sought to challenge the Mareva and preservation portions of the Order, not the Norwich provisions (although it was mentioned in argument that the Norwich order was being challenged but that is not the request in the notice of motion). For sake of ease, in these reasons, I refer to the Order as being challenged but the motion is limited to the Mareva and preservation portions of the Order.

[^2]: Chen held his interest through his shareholding in 1000709589 ONTARIO INC., being the actual shareholder of ACM.

[^3]: Indeed, Masih admits that he only acquired 841 Miners, not 1,500.