OSC approves settlement with crypto-asset consultancy CoinLaunch

The Ontario Securities Commission (OSC) has approved a settlement agreement with CoinLaunch Corp, an Oakville-based crypto-asset consulting firm. According to the OSC, the company traded in securities without registration.

As part of the settlement, CoinLaunch will pay a $30,000 fine and disgorge $12,223.06. Former CEO Reuven Cohen has also agreed not to act as the director or officer of a company trading securities, without proper registration.

The OSC alleges that between March 1, 2018 and September 30, 2018, CoinLaunch advertised and provided services to issuers of crypto-asset token offerings, including administration and promotion of crypto-asset token offerings.

Also known as initial coin offerings (ICOs), the fundraising avenue which allows companies to finance new ventures through the sale of virtual coins has been increasingly targeted by regulators such as the OSC. According to regulators, ICOs are basically securities, and selling them without proper disclosures or trading them without registration violates securities laws.

The initial “Wild West” character of ICOs, as such, has seen the steady incursion of law and order as regulators crack down and bring the new area in line with securities rules.

"If you are operating in the crypto-asset sector in Ontario, you must take steps to investigate and understand your obligation to comply with registration requirements under securities law," Jeff Kehoe, director of enforcement at the OSC, said. "Businesses that choose to ignore this obligation should consider themselves on notice and will face more severe consequences."

Founded in 2017, CoinLaunch operated an ICO platform that allowed clients to build, deploy, and monetize ICOs through a web-based service. The firm’s services also included helping companies solicit investors and advertise their initial coin offerings.

After becoming aware of the registration requirements related to its activities, CoinLaunch failed to seek registration or exemption, according to the OSC.

The company has decided to wind down its operations rather than initiate registration in the aftermath of the settlement.