Regulator wants US$51M payback over ex-Grand Bend merchant’s crypto scheme

Ontario’s securities regulator is seeking $8.5 million in fines and the repayment of US$51 million in ill-gotten funds after a former Grand Bend business owner and several of his companies were found guilty of Securities Act charges.

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Counsel for the Ontario Securities Commission (OSC) on Monday outlined the sweeping penalties it is seeking against Troy Hogg, a former owner of Gables and the Colonial Hotel, and several of his corporations, all of which were implicated in or profited from a fraudulent multimillion -dollar cryptocurrency scheme.

The OSC is seeking $2.5 million in fines against Hogg, included in the total $8.5 million penalties sought. The regulator is also seeking a lifetime ban from the province’s securities markets for Hogg and his businesses and an order to hand over US$51 million obtained through violations of Ontario’s securities laws.

“In our view, this is the largest crypto fraud that this tribunal has ever heard,” OSC counsel Alvin Qian told the Ontario Capital Markets Tribunal Monday morning.

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“The respondents fraudulently raised over US$51 million from investors around the world. At the center of these frauds was Mr. Hogg.”

Hogg did not participate in Monday’s hearing and announced he would not be attending in an email to the court registrar on Friday.

In his email, which was discussed by OSC counsel and panel members at Monday’s hearing on sanctions and penalties, Hogg said the proceedings have had a significant impact on his family and his job prospects.

A passage from Hogg’s email read at Monday’s hearing said: “I regret ever listening to the men who convinced me to do this and I am so sorry for anyone hurt by the actions chosen.”

The email made multiple references to bankruptcy and how it would take the rest of his life to pay off such steep financial penalties, the court heard.

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Qian urged the three-member panel to give the uncorroborated assertions in Hogg’s Friday email little weight when determining a proper penalty. The tribunal reserved its decision on sanctions and penalties Monday.

The Ontario Capital Markets Tribunal in June found Hogg and his companies, Cryptobontix, Arbitrade Inc., Arbitrade Ltd., TJL Property Management Inc. and Gables Holdings, were involved in or profited from the fraudulent offering of a crypto asset called Dignity, which its creators falsely claimed was backed by gold.

Sale of the tokens raised about US$51 million. The fraud unfolded between May 2017 and June 2019, the tribunal’s June decision said.

The court found Hogg and several of his companies guilty of various charges under Ontario’s Securities Act, including fraudulently misappropriating funds raised from the sale of tokens, fraudulently telling investors the tokens were backed by gold and selling securities without a registration.

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Qian said Monday the frauds were “particularly egregious” and the respondents repeatedly “lied to investors” by claiming the tokens were backed by audited gold reserves and that funds from the securities were being used to buy cryptocurrency mining rigs.

“In reality, a majority of the investor funds raised from the sale of those tokens was misappropriated by the respondents for their own benefit,” he said. “This fraudulent offering was simply a scam.”

Hogg has declined to participate in the tribunal’s previous hearings on the merits of the case, which began last November.

OSC counsel also is seeking more than $667,000 in legal costs against Hogg and the corporate respondents.

Hogg, Cryptobontix and Arbitrade – among other individuals and companies – are facing separate charges brought by the Securities and Exchange Commission (SEC), the securities regulator in the United States. The SEC proceedings have been adjourned until April 2025, the Capital Markets Tribunal heard Monday.

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