Decision in Brief: Hogg, Enforcement Proceeding, Sanctions and Costs, December 19, 2024

In an earlier decision, the Tribunal decided that Troy James Hogg and his companies violated Ontario securities law by trading and selling digital tokens. Those tokens, when considered together with the information given to investors about their offer and sale, met the definition of securities. 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 (a document that gives investors information about the investment) before selling the tokens. They did neither. The Tribunal also decided that Hogg and his companies committed fraud by lying about the tokens being backed by gold and using investors’ money for different purposes than what investors were told.

In this decision, the Tribunal decided what sanctions and costs should be ordered against Hogg and his companies (Cryptobontix Inc., Arbitrade Exchange Inc., Arbitrade Ltd., T.J.L Property Management Inc., and Gables Holdings Inc.) for their misconduct.

The Tribunal decided that Hogg must pay administrative penalties to the Commission totaling $2.5 million. Each of Cryptobontix, Arbitrade Exchange, Gables and TJL is jointly responsible for paying part of those administrative penalties. Hogg is the directing mind and sole shareholder of these companies and ultimately responsible for those amounts.

Arbitrade Ltd. must pay an administrative penalty of $2 million given its larger role in the misconduct and multiple violations of Ontario securities law.

The Tribunal decided that Arbitrade Ltd. must disgorge (give up to the Commission) US $41,622,965.27. Hogg and Cryptobontix are jointly responsible for US $7,822,296.72 of this amount.

Hogg must disgorge an additional US $10,109,038. TJL and Gables are jointly responsible for part of this amount.

Additionally, the OSC says that Hogg, TJL and Gables should disgorge the amount of profit they obtained from the sale of real estate properties which they acquired by using investors’ money. The Tribunal decided that while there may be situations where such profits can be disgorged, in this case the OSC did not establish that there was a gain or profit on the real estate that directly flowed from the use of investor funds.

The Tribunal decided that Hogg should be permanently prohibited from being a director or officer of any company, and he and his companies should be permanently prohibited from participating in Ontario’s capital markets. The Tribunal has repeatedly decided that permanent prohibitions are appropriate when the misconduct involves fraud.

Finally, the Tribunal decided that Hogg, Cryptobontix, Arbitrade Exchange and Arbitrade Ltd., are jointly responsible for paying $534,084.22 in costs to the Commission. Hogg, TJL and Gables are also jointly responsible for paying an additional $133,521.05 in costs.