One-time Grand Bend merchant vows to appeal US$51M crypto penalty

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A former Grand Bend business owner is vowing to appeal after he and several of his companies were slapped with huge fines and ordered to return approximately US$51 million in ill-gotten funds related to a fraudulent multimillion-dollar cryptocurrency scheme.  

Troy Hogg, a former owner of Gables and the Colonial Hotel, and several of his corporations have been handed hefty fines and other penalties for violations of Ontario’s Securities Act, the Capital Markets Tribunal, the disciplinary division of the Ontario Securities Commission (OSC), said in a decision released Friday.  

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Hogg and four of his companies – Cryptobontix, Arbitrade Exchange, TJL Property Management Inc. and Gables Holdings – have been ordered to pay $2.5 million in administrative fines to the OSC, the decision said.  

The tribunal ordered Arbitrade Bermuda, a related company, to disgorge US$41.6 million to the OSC, a total of which Hogg and Cryptobontix are jointly liable for US$7.8 million. Hogg was also ordered to hand over an additional US$10.1 million of investor funds to the regulator.  

In addition to the financial penalties, Hogg and the companies are permanently banned from trading securities and Hogg is permanently prohibited from being a director of officer of any securities issuer, the 17-page decision said.  

A defiant Hogg said Sunday he is planning to appeal the tribunal’s decision and took aim at the process, saying the deck was stacked against him.  

“The investigators, lawyers, adjudicators and hearings were all out of the same office,” Hogg said in a text exchange, adding he did not participate in tribunal proceedings on the advice of counsel. 

“When interviewing attorneys, almost all of them said rarely anyone beats the OSC. I wonder, why?” 

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The tribunal earlier this year found Hogg and his companies were involved in or profited from the fraudulent offering of a crypto asset called Dignity, which its creators falsely claimed was backed by gold.   

Counsel for the OSC made submissions to the tribunal on the penalties they were seeking against Hogg and the companies on Sept. 30. 

The decision by the three-person panel regarding penalties for Hogg and the companies, released on Friday, called the fraud “particularly egregious.” 

“As there is no gold backing the Tokens, the Tokens are worthless,” the decision said, calling the securities offering “a total sham.” 

Hogg did not participate in the hearings but did send an email to the tribunal before the Sept. 30 proceeding expressing regret about what happened and outlining the harm the proceedings have caused to his finances, family and job prospects. 

The tribunal did not find Hogg’s email sincere or persuasive.  

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“We do not interpret his statements as accepting his own responsibility for harm caused. They instead express regret for having listened to and become involved with other unnamed bad actors,” the tribunal’s decision on penalties said. 

Hogg on Sunday accused the OSC of selectively enforcing the Securities Act, and questioned whether the regulator had applied the same level of scrutiny seen with Dignity to other cryptocurrencies and trading platforms.  

“What makes those cryptocurrencies different than ours?” he said.  “I still stand by my statement that I did not do what they (the OSC) alleged I did.” 

The tribunal has also ordered Hogg and his companies to pay $667,605.27 in legal costs. 

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.  

jbieman@postmedia.com 

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