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The Capital Markets Tribunal has banned the operators of an unregistered crypto trading scheme for 10 years and imposed financial sanctions on them — weaker penalties than the Ontario Securities Commission (OSC) sought in the case.

The regulator alleged that Nvest Canada Inc.; its directors, Shorupan Pirakaspathy and Warren Carson; and another company, GX Technology Group Inc. violated securities rules when they created and sold a cryptoasset, GXTokens, which qualified as securities — activity that amounted to illegal distribution and unregistered trading.

While the tribunal found that the tokens themselves weren’t securities, it concluded that the way they were offered to investors meant they amounted to “investment contracts,” and therefore qualified as securities.

It also concluded that Pirakaspathy, Nvest Canada and GX Technology engaged in unregistered trading of those securities, all four respondents illegally distributed the securities, and Carson authorized the companies’ violations.

As a result, the tribunal ordered that each of them is banned from the markets for 10 years. They were also fined $200,000 each, and ordered to disgorge almost $300,000 and pay $162,390 in costs to the OSC.

The sanctions were less than the commission was seeking.

It asked for permanent bans and $500,000 fines against each of the respondents in the case, along with the disgorgment and over $300,000 in costs.

The tribunal disagreed.

The panel dismissed most of the aggravating factors cited by the commission in its submissions on sanctions, and it rejected the regulator’s push for tougher deterrents given the use of crypto and social media in the case.

Instead, it found that lesser penalties were warranted.

“The commission submits that the growing popularity of crypto investments and the accessibility of social media platforms, such as YouTube, as vehicles to promote these investments present a significant risk to investors and enhance the need for deterrence in this case,” the tribunal said in its reasons. “While we do not foreclose the possibility that the facts in another case might warrant such a finding, we do not think that the evidentiary record in this case supports this submission.”