Watchdog wraps crypto fraud case against ex-Grand Bend businessman

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Investors in a multimillion-dollar cryptocurrency scheme will have to wait to find out what Ontario’s capital markets regulator decides about the role of a former Grand Bend businessperson accused of securities fraud, after it wrapped its case Wednesday.

Counsel for the Ontario Securities Commission (OSC) concluded its case against former Grand Bend bar and restaurant owner Troy Hogg, who’s been a no-show at the hearings that began in November. Several of Hogg’s companies also are named in the proceedings.

“The evidence shows that the respondents knowingly misappropriated the majority of investor funds,” OSC counsel Alvin Qian told the Ontario Capital Markets Tribunal in his closing remarks Wednesday morning.

“The deliberate and fraudulent actions of the respondents . . . resulted in losses to investors and put the economic interests of investors at risk.”

As a result of an investigation by the OSC, the regulator alleges Hogg and his companies Cryptobontix, Arbitrade, TJL Property Management Inc. and Gables Holdings were involved or profited from the fraudulent offering of a crypto asset called Dignity, which its creators claimed was backed by gold, that raised about US$51 million. The fraud unfolded between May 2017 and June 2019, the OSC contends. The charges were announced by the provincial securities regulator in September 2022.

Hogg is the “central figure” connecting the companies named in the OSC case, Quan said. He was the “sole officer and officer” of Cryptobontix, TJL Property Management and Gables Holdings and was the “majority shareholder and de facto director” of Arbitrade Ltd., a Bermuda-based corporation.

Hogg has declined to participate in the tribunal hearings or defend himself against the securities fraud accusations. He skipped out on the first day of the proceedings on Nov. 21 and has not participated since.

Weeks before the start of the hearings, he lost a last-ditch bid to have the proceedings postponed as he secured another lawyer.

Qian said Wednesday Hogg had been served the OSC’s closing submissions.

The three-person Ontario Capital Markets Tribunal panel questioned commission counsel Wednesday at length on how the tokens, which were traded on online cryptocurrency platforms, constituted a security.

The tokens are a “classic investment contract” mediated through new technology, commission counsel Erin Hoult said. Hoult said the digital tokens, first called Unity and later Dignity, were held out as being a tradeable asset and redeemable for gold bullion that never existed.The fraud had three parts, the OSC alleges. The first was the claim that Dignity was backed by gold. The second related to an alleged audit of the gold stores the OSC claims never happened because no gold existed. The final fraud alleged by the regulator was the improper use of millions in investor money.

The OSC alleges US$7 million in investor funds from the sale of the tokens was used to buy Grand Bend properties. Another US$2 million was transferred to Canadian bank accounts held by TJL Property Management and Gables Holdings, the regulator alleges.

The OSC also claims US$1 million was misappropriated to third parties benefitting Hogg, to pay for two luxury boats.

Penalties for violating Ontario securities law can include a permanent ban on selling securities, handing over money received from the violations and paying a penalty of up to $1 million for each violation.

Hogg, Cryptobontix and Arbitrade – among other individuals and companies –  also face charges brought by the Securities and Exchange Commission (SEC), the securities regulator in the United States.

This article was originally sourced from www.lfpress.com