A Vancouver-based blockchain company broke the law when it published a misleading news release about the company’s financing, but the vice president who distributed the release did not, B.C.’s securities regulator says. ruled.
BLOK Technologies Inc., formerly known as Aida Minerals Corp., has been the subject of a BC Securities Commission investigation for years.
Last year, the company’s former CEO and chief financial officer entered into a settlement agreement with the commission, which admitted to violating state securities laws.
All allegations against the company and its employees stem from a June 2018 news release announcing that BLOK had raised more than $5.4 million from private investors.
The release indicates that the funds raised will be used to “advance the company’s current blockchain investment projects, evaluate new blockchain opportunities, and for working capital purposes,” but only $4.4 million of the total amount will be used to “advance the company’s current blockchain investment projects, evaluate new blockchain opportunities, and for working capital purposes.” It has not been disclosed that this amount will be paid to consultants.
In a decision issued Thursday, BCSC’s disciplinary committee concluded that BLOK’s release was misleading and that it should have known about it.
“A reasonable investor would have expected that BLOK might use a portion of the proceeds to improve its financial condition and pay its expenses,” the decision states. .
“However, prudent investors would not have expected BLOK to retain only approximately 18% of the funds raised to execute its business model and pay its expenses.”
Sanctions against the company, which is undergoing dissolution proceedings, will be decided at a later date.
The BCSC executive director also asked the commission to find that BLOK’s former vice president, James Joseph Hyland, also violated securities laws by allowing, permitting, and condoning the company’s misrepresentations.
Although Mr. Hyland was the contact person listed in the misleading news release, he told the committee that he had no knowledge of the company’s unpaid consulting fees at the time the release was issued.
According to the ruling, he said he did not question the information in the release because he trusted the information of other people working at the company to be accurate and did not see a need to double-check their work. .
The BCSC executive director argued that Mr. Hyland knew, or if he did not know, should have known, of the misstatements in the release regarding consulting fees.
The Commission found that the Director had not proven that Mr. Hyland knew about the misleading statements and that the “should have known” standard did not apply to specific securities laws that he was accused of violating. It was concluded that the standard is not applicable to this section.
“Accordingly, we refrain from passing judgment on whether Hyland should have known,” the decision reads.
“It’s quite possible that he should have done that. Some would say there was a general failure of good governance at BLOK. Perhaps Mr. Hyland, as vice president and audit committee chair, knew about the consulting agreement.” He probably should have played.”Given his prominence as a contact, he will play a larger role in drafting the news release. But those problems are not before us. ”