The Ontario Securities Commission (OSC) is alleging that Toronto’s Liquid MarketPlace, which was co-founded by YouTuber Logan Paul and facilitates the digital buying and selling of fractional ownership stakes in trading cards and other collectibles, is a “multi-layered fraud.”
In its June 19 application for an enforcement proceeding, the OSC claimed Liquid MarketPlace’s top executives, including Ryan Bahadori, Amin Nikdel, and Dennis Domazet, illegally diverted millions worth of investor funds for their “personal enrichment,” lied to OSC staff when questioned about their income, and violated Ontario securities law. Paul was not named in the proceeding.
The OSC recommends fines of up to $1 million per violation and the surrender of any gains obtained through them.
The OSC alleges that the group “misappropriated” approximately $3 million of the more than $10 million Liquid MarketPlace raised from investors. Per the OSC, this money was distributed via “hidden payments to shell corporations” linked to the trio “without any legitimate business purpose” and interest-free personal loans that were never repaid.
On June 21, the OSC’s Capital Markets Tribunal announced that it would hold a hearing next month regarding these allegations. The OSC lists seven alleged breaches of Ontario securities law and instances of conduct contrary to the public interest on the part of Liquid MarketPlace and its operators. In addition to other penalties, the OSC is recommending fines of up to $1 million per violation and the surrender of any gains obtained through the alleged fraud.
According to the OSC, Bahadori (co-founder and CEO), Nikdel (co-founder, COO, and CTO), and Dennis Domazet (former CFO and current advisor) operate and control the non-fungible token (NFT) marketplace startup, which was founded in 2021 and launched in 2022.
BetaKit has reached out to Liquid MarketPlace, Bahadori, Nikdel, and Domazet for comment.
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According to the OSC, Bahadori used company credit cards and funds to finance nearly $500,000 in personal expenses, including “high-end fashion, expensive jewellery and watches, personal health, and luxury spa services.”
The OSC also alleged Liquid MarketPlace sold $2.7 million in tokens the regulator claims were unregistered securities, falsely told buyers these tokens represented “legal ownership” in underlying collectibles like rare physical sports and Pokémon trading cards and digital assets like NFTs, and claimed those collectibles had been “authenticated, appraised, and insured.”
“These false and misleading representations exposed [token buyers] to undisclosed risks, caused investor losses and benefitted [Liquid MarketPlace] and its associates,” argues the OSC.
The OSC’s Capital Markets Tribunal will hear the case on July 31.
Feature image courtesy Pexels. Photo by Katrin Bolovtsova.
