The Capital Markets Tribunal has ruled NovaTech FX committed securities fraud in Ontario.

Following analysis of evidence submitted by the Ontario Securities Commission (OSC), CMT published its findings on July 22nd, 2024.

Issues CMT examined as part of OSC’s ongoing proceedings against NovaTech FX included:

a. Is the PAMM product a security?

b. Did Nova Tech engage in unregistered trading of securities?

c. Did Nova Tech engage in an illegal distribution of securities?

d. Did Nova Tech breach the temporary cease trade order?

e. Did Petion authorize, permit, or acquiesce in Nova Tech’s breaches of Ontario securities law?

f. Did Nova Tech and Petion engage the Tribunal’s public interest jurisdiction?

Running through each of the examined issues, CMT found;

We conclude that the PAMM product sold by Nova Tech has all the characteristics of an investment contract and is therefore a security.

Nova Tech was in the business of selling securities – specifically the PAMM product. As such, we find that Nova Tech violated s. 25(1) of the Act by engaging in the business of trading in securities without being registered with the Commission.

Because the PAMM products were not previously issued securities, this trading qualifies as a distribution of securities requiring a prospectus.

We find that Nova Tech’s removal of Canada as an address option for investors did not prevent Ontario investors from investing funds in Nova Tech while the temporary cease trade order was in place.

Without additional controls, this effort to comply with the temporary cease trade order was illusory at best.

We find that Petion, as the sole director and CEO of Nova Tech, authorized Nova Tech’s breaches of Ontario securities law.

Nova Tech’s conduct in continuing to accept deposits while freezing withdrawals is troubling. However, we decline to make a finding in the public interest in these circumstances.

There’s a lot more nuance on these points with respect to Canadian law, so CMT’s full order is worth a read for clarification.

Looking forward, CMT has ordered OSC to contact them by August 6th

to arrange an attendance, to schedule a hearing regarding sanctions and costs, and the delivery of materials in advance of that hearing.

While it’s all but certain NovaTech FX and the Petions will be penalized with sanctions and costs at this point, it’s unclear how OSC will proceed given the Petions were last reported to be hiding in Panama.

 

Update 14th August 2024 – The Capital Markets Tribunal held a NovaTech FX hearing on August 12th. Nobody representing NovaTech FX or the Petions showed.

The court has ordered OSC to file written evidence pertaining to sanctions and costs by September 23rd. Another hearing is then scheduled for October 2nd.