Investors alleged to have been misled over deck slides and prominent ‘advisors’ who hadn’t given their consent
A blockchain investment firm and its founder have agreed to a $1.1 million settlement after allegations they mislead investors in a private placement that raised about $20 million.
NextBlock Global Ltd and its founder Alex Tapscott were alleged by the Ontario Securities Commission to have misled investors in its slide decks and represented certain prominent figures in the blockchain space as NextBlock advisors when, in fact, these individuals had not given their consent.
The first private placement raised $20 million from 113 accredited investors, of which $3 million was investment personally by Tapscott or through corporations of the firm’s principles. A second private placement and reverse takeover was planned until the misleading slides were uncovered and reported by Forbes.com. NextBlock was subsequently wound up.
Despite the untruthful slides, investors made a large profit on the initial deal. And having already received $28 million on top of their initial $20 million investment, they may still receive more as a result of the winding-up process. Meanwhile, Tapscott declined to take $3 million he was due in interest and returned the money to investors.
A hearing panel of the OSC yesterday approved a settlement that stated Nextblock will pay $700,000 and Tapscott $300,000 in administrative penalties, along with $100,000 in costs.
Tapscott also agreed to perform community service by delivering ethics presentations to students at Canadian business schools, which will highlight the importance of complying with Ontario securities law. In addition, he will publish an open letter about the impact and consequences of his misconduct in a national news publication.
"We will not tolerate market participants who play fast and loose with the facts when providing offering memoranda to prospective investors, including marketing decks," Jeff Kehoe, director of enforcement at the OSC, said. "This dishonest behaviour robs investors of the opportunity to make informed investment decisions and undermines confidence in our markets.
"This settlement reinforces an important message. We will take action to address misleading disclosure and the serious harm it causes to Ontario investors and our markets, even if investors suffer no financial loss."