Amid WonderFi deal, Coinberry reaches settlement in Cinaport lawsuit following failed TSXV takeover​​

Cinaport to receive 3.1 million common shares in WonderFi.

Shortly after WonderFi’s deal to acquire crypto startup Coinberry was announced earlier this week, it was revealed that Cinaport Acquisition Corp. III had agreed to settle its lawsuit against Coinberry.

Toronto-based Cinaport sued Coinberry following the December collapse of a deal that would have seen Toronto cryptocurrency trading platform Coinberry acquire Cinaport as a means of going public.

In the lawsuit, Cinaport alleged that Coinberry breached the “standstill” provisions of a letter of intent (LOI) the two firms signed in 2021, by negotiating and pursuing a separate acquisition deal with WonderFi, according to court documents filed in the Ontario Superior Court of Justice that were obtained by BetaKit.

Cinaport’s lawsuit followed the collapse of a deal that would have seen Coinberry acquire Cinaport as a means of going public.

As part of the settlement agreement, Cinaport is set to receive 3.1 million common shares in Vancouver-based WonderFi upon closing of the WonderFi-Coinberry deal. These settlement shares are part of the $38.5 million CAD in stock that WonderFi has agreed to pay for Coinberry. This settlement is conditional upon the close of the WonderFi acquisition.

BetaKit has reached out to all three companies for comment. Cinaport President and CEO Avi Grewal and Coinberry co-founder and CEO Andrei Poliakov declined to comment.

WonderFi co-founder and CEO Ben Samaroo told BetaKit that this settlement agreement was a prerequisite for the acquisition. “WonderFi saw the value in achieving a clean deal and the parties came together to reach a mutually beneficial settlement, which allows the acquisition to move forward,” he said.

In its lawsuit, Cinaport was initially seeking $14 million in damages from Coinberry. WonderFi’s shares are currently trading at $1.28 CAD apiece under the symbol ‘WNDR’ on the Neo Exchange, putting the present value of the settlement at approximately $3.97 million—a significant but nonetheless small fraction of the $38.5 million WonderFi is set to pay for Coinberry as part of its all-stock acquisition deal, based on WonderFi’s current share price.

Cinaport is a TSX Venture Exchange-listed capital pool company (CPC). Similar in form to special purpose acquisition companies (SPACs), CPCs are a TSXV creation that serve as an alternative mechanism for private companies to raise capital and go public, bypassing the traditional initial public offering process and some of the costs and disclosures associated with it.

Cinaport first entered an LOI with Coinberry in February 2021 that would have seen Coinberry takeover Cinaport and go public on the TSXV.

As part of this transaction, Coinberry was to undertake a brokered private placement and raise up to $10 million. However, on December 13, 2021, Cinaport disclosed that its LOI with Coinberry had been terminated by Coinberry, but did not cite any reasons for move.

RELATED: WonderFi to acquire Coinberry for $38.5 million in all-stock deal as Canada’s crypto space continues to consolidate

Shortly afterwards, Cinaport announced that it was suing Coinberry in Ontario Superior Court of Justice, alleging that Coinberry breached the standstill clause in its LOI with Cinaport, and seeking $12 million in damages for breach of contract and $2 million in punitive damages.

In Cinaport’s statement of claim, Cinaport alleged that as part of the standstill provisions in the LOI the two companies signed, Coinberry agreed not to participate in or negotiate other transactions. Cinaport claimed that Coinberry terminated its deal with Cinaport in December following “clandestine negotiations” with WonderFi that violated this provision.

In the filing, Cinaport said both parties expected to close this deal around June 2021. When it did not, Cinaport claims that both companies continued to work towards a deal. That August, Coinberry became the second crypto asset dealer in Canada to receive regulatory approval from the Ontario Securities Commission.

In its statement of defense, Coinberry alleged that it began speaking with WonderFi in August after being connected by Cinaport. Coinberry claimed that Grewal verbally waived the standstill provision during a conference call with WonderFi, which Cinaport denied in its reply to this filing.

RELATED: Coinberry second crypto asset dealer to receive regulatory approval by OSC

Coinberry alleged the reverse takeover did not come to fruition in part because the two companies ultimately had disagreements on several issues, including Coinberry’s valuation and executive structure and compensation, which Cinaport also denied.

In exchange for 3.1 million common shares in WonderFi, Cinaport has agreed to give Coinberry full release from its legal action. Once the deal closes, Cinaport will remain a CPC in search of another transaction.

Meanwhile, Kevin O’Leary-backed WonderFi will soon own two of Canada’s six registered crypto trading platforms between Coinberry and Bitbuy—which WonderFi acquired last month. Once the Coinberry deal is complete, Coinberry and its business will become part of WonderFi, which is currently attempting to create the largest crypto user base in Canada through acquisitions.

WonderFi aims to build a broader Web3 ecosystem by combining three separate segments of the crypto ecosystem: centralized finance—or the kind of crypto trading offered by Coinberry and Bitbuy—decentralized finance (DeFi), through its own DeFi product, and NFTs and gaming. Amid a competitive sector, WonderFi views owning all three of these different verticals as its differentiator.

Feature image courtesy WonderFi.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling in-depth Canadian tech stories and breaking news. His coverage is more complete than his moustache.

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