OSC Panel approves settlement with crypto-asset consulting firm CoinLaunch

TORONTO – A panel of the Ontario Securities Commission (OSC) has approved a settlement agreement (the settlement) with CoinLaunch Corp, a firm that operated in the crypto-asset sector, for engaging in and holding itself out as engaging in the business of trading in securities without registration.

CoinLaunch, which chose to wind down its operations rather than initiate a registration process, will pay an administrative penalty of CAD $30,000 and disgorge CAD $12,223.06. CoinLaunch’s former CEO Reuven Cohen has also agreed not to become or act as a director or officer of any company which engages in or holds itself out as engaging in trading securities, without the applicable registration or an exemption under Ontario securities law.

“If you are operating in the crypto-asset sector in Ontario, you must take steps to investigate and understand your obligation to comply with registration requirements under securities law,” said Jeff Kehoe, Director of Enforcement at the OSC. “Businesses that choose to ignore this obligation should consider themselves on notice and will face more severe consequences.”

Between March 1, 2018 and September 30, 2018, CoinLaunch advertised and provided services to issuers of crypto-asset tokens, which included helping clients administer and promote crypto-asset token offerings. Taken together, these services constituted acts in furtherance of trades and required registration under Ontario securities law.

Upon becoming aware of the registration requirements, CoinLaunch did not make use of the supports the OSC has in place to foster Ontario’s emerging crypto-asset sector, for example, it did not engage with the OSC to obtain relief from registration requirements or seek registration. However, during the OSC’s investigation, CoinLaunch cooperated with staff and took steps to remediate its conduct, including removing websites it had created for crypto-asset token issuers from the internet and ceasing its business relationship with token issuers.

Those operating in the crypto-asset sector should review guidance published by Canadian securities regulators. Firms that are unclear on how securities requirements apply to their business should reach out to their securities regulator with any questions they may have.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in the capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk.  Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at www.osc.ca.

 

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