A former Grand Bend business person committed fraud in a $51.7-million US crypto scheme, a division of the Ontario Securities Commission found in a recent ruling.

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A former Grand Bend businessperson committed fraud in a US$51.7-million crypto scheme, a tribunal of the Ontario Securities Commission has found.

After an investigation by the commission and a hearing that began in November 2023, the Ontario Capital Markets Tribunal found Troy Hogg committed fraud by offering a crypto asset or token called Dignity, which its creators claimed was backed by gold when it was not, that raised US$51.7 million.

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“He was found to have breached various sections of Ontario securities law. He acted fraudulently by misappropriating funds,” JP Vecsi, spokesperson for the Ontario Securities Commission (OSC), said Tuesday.

 Hogg has by July 2 to arrange a hearing regarding what sanctions or costs he will face as a result of the ruling. The hearing must be heard before July 19, the tribunal said.

“Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Bermuda acted fraudulently by falsely representing to investors that the Tokens were backed by gold and that gold was acquired and confirmed through an audit . . . the respondents acted fraudulently by misappropriating funds raised from the sale of tokens for purposes other than those represented to investors,” the tribunal said in a ruling dated June 14.

Hogg is the central figure connecting the companies named in the commission’s case, the OSC alleged.  He was the “sole officer and officer” of Cryptobontix Inc., TJL Property Management Inc. and Gables Holdings Inc. and was the “majority shareholder and de facto director” of Arbitrade Ltd., a Bermuda-based corporation, a lawyer for the commission said during the tribunal hearing.

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Hogg is the former owner of the Colonial Inn and Gables in Grand Bend.

The securities regulator froze and sold off assets, including the Colonial Hotel, in 2021 as part of its investigation. 

The commission alleged the fraud occurred between May 2017 and June 2019. The charges against Hogg and five companies were announced in September 2022.

The matter was heard by the three-person Ontario Capital Markets Tribunal, an independent division of the Ontario Securities Commission that regulates the province’s capital markets. It is not a court. However, the Ontario Securities Commission can start quasi-criminal proceedings in the Ontario Court of Justice for violations of Ontario securities law and can also start civil proceedings in the Superior Court of Ontario.

“In our view the matter is still ongoing. The options are there but we cannot comment further,” Vecsi said.

The tribunal can order costs of an investigation to be paid, ban any future trading and impose heavy fines and penalties, he said.

As for where the money went, the tribunal offered a breakdown in its ruling. That included:

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• $6.6 million to pay fees Arbitrade Bermuda owed to another business.
• $15.9 million used by Arbitrade Bermuda for purchase of a building and art, directors’ and officers’ fees, travel and business meals.
• US$4.1 million to acquire 3,400 mining rigs.
• $7 million for the purchase of properties and related businesses in Grand Bend.
• $2 million transferred to bank accounts at BMO and TD held by Hogg’s businesses.
• $1 million transferred to third parties for the benefit of Hogg.

In November 2020, the commission issued “freeze” directions against Hogg that prohibited him from dealing with property derived from the sale of Dignity tokens, Vecsi said.

The fraud had three parts, the tribunal said. The first was the claim that Dignity was backed by gold. The second related to an alleged audit of the gold stores the OSC claims never happened because no gold existed. The final fraud alleged by the regulator was the improper use of millions in investor money.

Hogg was not at the hearings that began in November.

Hogg also faces charges in Miami, Fla., brought by the Securities and Exchange Commission (SEC), the securities regulator in the United States. His trial was expected to begin this week in the U.S. District Court for the Southern District of Florida.

The SEC alleges Hogg and the other defendants violated numerous U.S. securities laws, including selling an unregistered security and selling securities with intent to defraud.     

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