Decision in brief: Hogg, Enforcement Proceeding, Merits, June 14, 2024

In this enforcement proceeding, the OSC says that Troy James Hogg and his companies traded and sold digital tokens that met the definition of securities in Ontario. Before trading and selling the tokens, Hogg and his companies were required to register with the OSC and file a prospectus (a document that provides information about the investment), and they did neither of those things.

A digital token is a type of crypto asset that can be traded and tracked on a ledger. A crypto asset is a digital asset that uses cryptography (a method of securing data), a peer-to-peer network and a digital ledger system to record transactions.

The OSC also says that Hogg and his companies committed fraud. Hogg and his companies said that the tokens were backed by gold, and the money raised would be used to purchase gold and for crypto mining (creating new crypto assets). The OSC says that the gold that was supposed to back the tokens did not exist, and investors’ money was used for purposes other than purchasing crypto mining equipment and, indirectly, for purchasing gold.

Shortly before the hearing started, Hogg asked the Tribunal to adjourn (delay) the hearing. Hogg wanted the adjournment because his lawyer had recently stopped representing him, and he was trying to get a new lawyer. Hogg also said that he needed more time to get witnesses from another country to attend the hearing and that another case against him in the United States starting in a few months would provide evidence that would be helpful for him in the Tribunal’s hearing. The Tribunal dismissed his request for an adjournment as he did not show that there were “exceptional circumstances” requiring an adjournment.

The Tribunal decided that the tokens, when considered together with the information given to investors about the offer and sale of tokens, met the definition of securities in Ontario. This was because the whole scheme was an “investment contract”, one type of security. Hogg and his companies were required to register before trading the tokens and were required to file a prospectus before selling the tokens.

The Tribunal also decided that Hogg and his companies committed fraud. They lied about the tokens being backed by gold and they used investors' money for different purposes than what the investors were told.

As a result of this decision, the Tribunal will hold a hearing to decide what sanctions and costs should be ordered against Hogg and his companies because of their conduct.