The founder of now-defunct cryptocurrency firm Einstein Exchange has been ordered by a BC court to pay $535,000 to a man who sold him bitcoin in 2019.
This court order comes over a year after Einstein Exchange founder Michael Gokturk was sued by Scott Nelson, a Vancouver entrepreneur, in 2019, for breach of contract related to the bitcoin. According to the lawsuit and as reported by CBC News, Gokturk failed to pay Nelson after Nelson sold him 50 bitcoin at an agreed price of $10,700 per bitcoin.
The judgment comes over a year after Gokturk’s firm, Einstein Exchange, folded.
Since 2019, the price of bitcoin has skyrocketed. In the suit, Nelson asked for either the value of the 50 bitcoin in February 2021 (approximately $3 million) or the value of the bitcoin at the time of the deal in 2019, which was $535,000.
The judgment also comes over a year after Gokturk’s firm, Einstein Exchange, folded. The firm shut its doors in 2019 amid a number of complaints from customers that they could not access their funds on the platform.
In November 2019, the British Columbia Securities Commission (BCSC) began investigating Einstein Exchange and seized the company’s assets. At the time, the company owed $16 million to its user base, including $11 million in cryptocurrencies.
Nelson’s civil suit against Gokturk was filed in October 2019. The BC Supreme Court found although Nelson paid Gokturk the 50 bitcoin in 2019, Gokturk never paid back Nelson under the original contract. The court also said Gokturk acknowledged the debt owed to Nelson in an August 2019 exchange.
The Einstein Exchange was the second Canadian crypto exchange to shutter in 2019, following the collapse of another BC-based crypto exchange, QuadrigaCX. Toward the end of 2018, the company’s co-founder and CEO, Gerald Cotten, passed away while abroad and about $250 million of the firm’s assets were left completely inaccessible.
A report released in 2020 by the Ontario Securities Commission claimed that QuadrigaCX collapsed due to fraud committed by its CEO prior to his passing. The OSC classified Cotten’s actions as a Ponzi scheme.
Since the downfalls of Einstein Exchange and QuadrigaCX, another Canadian cryptocurrency firm, CoinSquare, has also run into controversy. Last year, CoinsSquare reached a settlement with the OSC over allegations of wash trading. This led to a major overhaul of Coinsquare’s executive team, which included co-founder and CEO Cole Diamond being replaced by Stacey Hoisak.
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Experts have noted that cryptocurrency regulation is still in its early stages in Canada, as many forms of crypto are not considered a security and regulatory attitudes often vary by province.
In the last year or so, several regulators, including the OSC and Canadian Securities Administrators, have made efforts to bring crypto trading platforms into compliance with securities regulations.
In March, the CSA issued new guidance for platforms facilitating trading in security tokens or instruments or contracts involving crypto assets. The CSA now requires such firms to register as an investment dealer and become a member of the Investment Industry Regulatory Organization of Canada (IIROC).
Image source Unsplash. Photo by André François McKenzie.