The Ontario Securities Commission (OSC) has charged Stephan Katmarian, the CEO and COO of Peblik Inc., for violating Ontario’s Securities Act.
A resident of Mississauga, Ontario, Katmarian heads up Peblik, which, according to its website, is a decentralized, natural resource-based network, powered by the blockchain and a native token. Peblik lists its base as Barbados.
The OSC has charged Katmarian with fraud, trading in securities without registration, trading in securities without a prospectus, and making a statement in information submitted to the OSC that was misleading or untrue.
The OSC allegations are related to a period between January 1, 2018 and August 8, 2019, when the OSC says Katmarian was “the directing mind” of Peblik, when the company promoted an initial coin offering (ICO) of a crypto token called Peblik Token.
“Peblik raised approximately $550,000 from at least 28 investors in Ontario, despite previously stating to the OSC that no sales had been made to Ontario residents,” the statement from the OSC reads. “Further, at Katmarian’s direction, the company represented to investors that the value of the Peblik Token was backed by Peblik’s ownership interest in a USD $4.8 billion mineral resource deposit in Canada. This statement regarding Peblik’s ownership interest was false.”
Peblik’s website touts its offering as “a token backed by natural resource assets.” The organization states, “large natural resource deposits, including past producing mines with proven resources, sit idle all over the world. The Peblik token is the catalyst to unlock the value in these undeveloped assets.”
Peblik’s Crunchbase account states it is “an asset-backed cryptocurrency supported by an advanced-stage USD $4.8 billion mineral deposit in Canada.” Crunchbase lists Peblik as having raised $74 million in its ICO.
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Current Ontario regulations place restrictions on the sale of tokens as securities in the province. Restrictions that limited Kik from selling its Kin token in Ontario for its own ICO in 2017. Kik, famously, faced its own legal battle with the US Securities Exchange Commission (SEC), which ended in a one-time fine of $5 million USD and led to the initial shutdown and sale of Kik’s app, in addition to the acquisition of its employees in 2019.
The charges against Peblik follow an investigation conducted by staff within the OSC Enforcement team that investigate quasi-criminal and criminal offences related to securities. The primary objective of the team is to protect investors and further enhance confidence in the Canadian capital markets through effective enforcement.
Under Ontario’s Securities Act, the OSC has the authority to lay quasi-criminal charges, which means a jail term is a possible sanction if a defendant is convicted of a violation of the Act. The court can impose a jail term of not more than five years less a day, a fine of not more than $5 million for each conviction, or both jail and fine sanctions.
According to the OSC, its Enforcement team has pursued 49 quasi-criminal and criminal matters to date, with 70 accused.
Canada’s security regulations have been ever evolving over the past few years as digital currency becomes increasingly popular. Most recently, the OSC expressed plans to crack down on unregistered cryptocurrency trading platforms following the Canadian Securities Administrators (CSA) issuing new guidance for platforms currently facilitating trading in security tokens or instruments or contracts involving crypto assets.
Notably, Canada’s national securities regulation is disjointed and run by organizations in each province and territory. Canada is the only G20 country without a national securities regulator and, according to recent reporting by The Globe and Mail, an organization charged with creating a national securities regulator is set to be shut down “due to waning political support for the project in jurisdictions such as Ontario and British Columbia.”
Photo by Stanislaw Zarychta on Unsplash