Decision in brief: Phemex Limited, Enforcement Proceeding, Merits, December 18, 2024

In this enforcement proceeding, the OSC says that the respondents, Phemex Limited (Phemex) and Phemex Technology Pte. Ltd., violated Ontario securities law by selling securities without being registered to do so and without having filed a prospectus (a document that gives investors information about the investment) for those securities.

The respondents operated a global crypto asset trading platform that at least 117 Ontario investors used to deposit and trade crypto assets. 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.

Phemex users entered into contracts allowing them to access Phemex’s platform. The OSC says that the contracts users agreed to when they deposited money or crypto assets, or bought or sold crypto assets, are securities.

The Tribunal decided that the crypto contracts are securities, and that the respondents were in the business of trading securities without being registered to do so, and without filing a prospectus. The respondents did not receive an exemption from either requirement.

Phemex operated the trading platform through its website and made statements to solicit Ontario investors to sign onto the platform and trade. Phemex Technology operated the mobile app where trading could also take place.

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