On July 24, the Ontario Securities Commission (OSC) approved a settlement (Settlement) with CoinLaunch Corp. It seems that CoinLaunch’s principals tried to jump on the crypto bandwagon without realizing that their “crypto consulting” services breached the registration requirements in the Securities Act (Ontario).

In its brief history, CoinLaunch advertised a package of services that included:

  • helping companies develop strategies to get funding for their token offerings;
  • advising on crowd sale campaigns;
  • marketing token offerings through roadshows, landing pages and other advertising;and
  • helping companies solicit investors and go through the investment process.

It provided some of these services in connection with two offerings of tokens made available on foreign crypto-asset trading platforms.

An OSC staff investigation led to the principals of CoinLaunch becoming aware of the applicable registration requirements. They voluntarily took certain remedial steps, including removal of the crypto-currency landing pages that CoinLaunch was hosting.Ultimately, they wound up the firm’s business instead of seeking registration and agreed, among other things, to pay an administrative penalty of $30,000, disgorgement of $12,000 and $10,000 in costs. CoinLaunch’s CEO also undertook to render inaccessible (and therefore valueless) the tokens received by CoinLaunch as compensation for its services.

The sanctions provided for in the Settlement reflect the OSC’s recognition that CoinLaunch’s directors and officers didn’t realize that the registration requirements applied to their consulting activities. However, the OSC emphasized that, as a result of its decision (and presumably the attendant publicity), such an excuse would be unlikely to carry much weight in the future. AUM Law has extensive experience helping businesses evaluate whether or not their existing or planned business activities require registration and navigate the process for becoming registered. Please contact us for a free consultation.