A former Grand Bend hotel owner has been found guilty of orchestrating a fraudulent cryptocurrency scheme that amassed $51.7 million, according to the Ontario Securities Commission (OSC).
Following a comprehensive investigation and a tribunal hearing that commenced in November 2023, the Ontario Capital Markets Tribunal concluded that Troy Hogg committed fraud through the sale of a crypto asset known as Dignity. Hogg and his associates falsely claimed that the token was backed by gold, an assertion that was proven to be untrue.
“He was found to have breached various sections of Ontario securities law. He acted fraudulently by misappropriating funds,” stated JP Vecsi, spokesperson for the Ontario Securities Commission, on Tuesday.
Hogg has until July 2 to schedule a hearing regarding the sanctions or costs he will incur as a result of the ruling. The tribunal mandates that this hearing must occur before July 19.
The tribunal’s ruling, dated June 14, highlighted the fraudulent activities of Hogg and his associated entities, Cryptobontix, Arbitrade Exchange, and Arbitrade Bermuda. The tribunal stated, “Hogg, Cryptobontix, Arbitrade Exchange, and Arbitrade Bermuda acted fraudulently by falsely representing to investors that the tokens were backed by gold and that gold was acquired and confirmed through an audit. The respondents acted fraudulently by misappropriating funds raised from the sale of tokens for purposes other than those represented to investors.”
The OSC alleged that Hogg played a central role in the fraud, connecting various companies involved in the case. Hogg was identified as the “sole officer and officer” of Cryptobontix Inc., TJL Property Management Inc., and Gables Holdings Inc. Additionally, he was described as the “majority shareholder and de facto director” of Arbitrade Ltd., a Bermuda-based corporation.
In 2021, the OSC froze and subsequently sold off assets, including the Colonial Hotel, as part of their investigation into the fraud. The fraudulent activities reportedly took place between May 2017 and June 2019, with charges against Hogg and five companies being announced in September 2022.
The tribunal, an independent division of the OSC, is responsible for regulating Ontario’s capital markets. While it is not a court, the OSC has the authority to initiate quasi-criminal proceedings in the Ontario Court of Justice for violations of securities law, as well as civil proceedings in the Superior Court of Ontario.
“In our view, the matter is still ongoing. The options are there, but we cannot comment further,” said Vecsi.
The tribunal has the power to order the payment of investigation costs, ban future trading activities, and impose substantial fines and penalties. In its ruling, the tribunal provided a detailed breakdown of how the misappropriated funds were used, including:
- $6.6 million to pay fees owed by Arbitrade Bermuda to another business.
- $15.9 million used by Arbitrade Bermuda for the purchase of a building, art, directors’ and officers’ fees, travel, and business meals.
- $4.1 million to acquire 3,400 mining rigs.
- $7 million for the purchase of properties and related businesses in Grand Bend.
- $2 million transferred to bank accounts at BMO and TD held by Hogg’s businesses.
- $1 million transferred to third parties for Hogg’s benefit.
In November 2020, the OSC issued “freeze” directions against Hogg, prohibiting him from dealing with property derived from the sale of Dignity tokens.
The tribunal identified three key elements of the fraud: the false claim that Dignity was backed by gold, the non-existent audit of the alleged gold stores, and the improper use of millions in investor funds.
Hogg did not attend the hearings that began in November.
In addition to the charges in Ontario, Hogg faces legal troubles in the United States. The Securities and Exchange Commission (SEC) has brought charges against him in Miami, Florida. His trial is expected to begin this week in the U.S. District Court for the Southern District of Florida. The SEC alleges that Hogg and his co-defendants violated multiple U.S. securities laws, including selling unregistered securities and defrauding investors.
