Blockchain entrepreneur Alex Tapscott has paid a $300,000 penalty and will teach ethics seminars to business students as part of his settlement with Ontario’s securities watchdog over allegations that his venture capital fund’s marketing materials were misleading to investors.
But the settlement between Mr. Tapscott and the Ontario Securities Commission (OSC) does not ban Mr. Tapscott from being a director or officer of a company for a period of time, as such settlements frequently do.
NextBlock Global Limited, the fund that Mr. Tapscott co-founded and ran, has also paid a $700,000 penalty and $100,000 to cover the costs of the investigation. In total, Mr. Tapscott and NextBlock have paid $1.1-million in fees and expenses.
Mr. Tapscott has also voluntarily penned an open letter about the consequences of his misconduct that he plans to publish in a national publication within one week, and will touch on the same themes in his presentations to students.
The fund, which was aiming to invest in public and private early-stage blockchain companies, raised $20-million in a private placement during the summer of 2017 and had planned to go public through a reverse takeover of a TSX-listed shell company that fall.
The go-public effort was cancelled in November, 2017, after Forbes magazine reported that four of the prominent blockchain figures listed as advisers in slides for NextBlock’s investor deck had never agreed to act in those roles.
After the news, both CIBC World Markets Inc. and Canaccord Genuity Group Inc. withdrew as underwriters. NextBlock wound up its operations and repaid investors their initial $20-million investment, plus an additional $28-million in profits. Mr. Tapscott voluntarily declined roughly $3-million in carried interest to which he was entitled.
OSC vice-chair Tim Moseley, who presided over the hearing, said that approving the settlement is in the public interest because it avoids a costly hearing. But he added that he had some hesitation because Mr. Tapscott is experienced in the capital markets.
“He ought to have known better,” Mr. Moseley said.
“I have learned a lot from this process," Mr. Tapscott told reporters after the hearing, “and I am deeply grateful to our investors for their patience and support.
"And of course I’m very happy that they all prospered. I still believe that blockchain is foundational to the next era of human progress and I for one am committed, now more than ever, to play my part.”
Stay up to date on all our Streetwise stories. We have a Streetwise newsletter, covering mergers and acquisitions, plus financial services news. It is sent Tuesday to Saturday morning. Sign up today.