Ontario’s securities watchdog has reached a settlement with cryptocurrency consulting company CoinLaunch Corp. over allegations that the firm traded securities without being registered to do so.
The terms of the settlement have not been announced, but will be read out at a hearing in Toronto on Wednesday.
The regulatory action is the latest in a string of crackdowns by Ontario’s securities regulator on companies involved in initial coin offerings, or ICOs. The emerging form of fundraising, similar to crowdfunding, allows companies to finance a new venture through the sale of virtual tokens or coins.
Regulators, including the Ontario Securities Commission (OSC), have argued that many such offerings have the characteristics of securities, and that selling them without making required disclosures, or trading them without being registered with the Commission, constitute violations of the province’s securities laws.
The OSC alleges that between March 1, 2018, and Sept. 30, 2018, Oakville, Ont.-based CoinLaunch advertised a package of marketing and promotional services aimed at helping companies launch new token offerings.
The services offered included helping companies solicit investors, taking new virtual currency offerings on roadshows and advertising the offerings through marketing campaigns, according to the OSC’s statement of allegations.
The consulting firm also facilitated the offerings of two tokens: the Buggyra Coin, launched by an off-road truck-racing team from the Czech Republic, and the EcoRealEstate token, whose sale was intended to finance the acquisition and development of a village resort in Portugal.
Both tokens have the characteristics of securities as defined by the province’s Securities Act, according to the OSC. Offerings are typically considered securities if they involve money being invested in a common enterprise such as a project or a company, with the expectation of earnings profits that come from the efforts of others, according the Canadian Securities Administrators organization.
“As a result, CoinLaunch engaged in and held itself out as engaging in the business of trading in securities, without registration under Ontario securities law and where no exemption from the registration requirement was available,” the statement of allegations reads.
It also notes that the company “is not, and has never been, registered with the Commission in any capacity.”
CoinLaunch could not be reached for comment.
The company’s business model has changed over time, according to the OSC’s statement of allegations. After its incorporation on Oct. 16, 2017, CoinLaunch operated a platform that allowed members of the public to create tokens on the Ethereum blockchain. Ethereum is a public, decentralized network that allows members of the public to create their own applications.
But around March 1, 2018, CoinLaunch began shifting its focus to consulting cryptocurrency companies on how to launch new coin offerings.
The company is currently winding down its operations, the securities regulator said.
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Alexandra Posadzki