Quebec’s financial watchdog is putting the squeeze on Dominic Lacroix.
He is a Quebec City resident who is thought to be behind an initial coin offering, PlexCoin, that is set to launch on Friday, October 13th.
The Autorité des marchés financiers (AMF) is working hard to prevent that from happening, and is ramping up the pressure.
Next Tuesday, on October 3rd, before Quebec Superior Court in Quebec City, the AMF will argue that Lacroix should be found guilty of contempt of court for failing to comply with orders issued by the Quebec Financial Markets Administrative Tribunal. What’s more, the AMF will be asking for a “severe sentence,” said Sylvain Théberge, AMF’s spokesperson. He refused to describe what he meant by a severe sentence.
Virtual currencies have captured the imagination of a certain segment of the public. Initial coin public offerings (ICO) are rising, raising more than US$1.8 billion so far this year. An ICO allows start-ups to raise funds by selling digital coins or tokens to investors. But regulators around the world are becoming increasingly concerned about the dangers posed by ICOs and are warning about the risks of asset bubbles, market manipulation and fraud. This week South Korea banned ICOs, keeping in lockstep with China. Switzerland in the meantime is investigating a number of cases of ICOs for possible breaches of regulations while Australian and UK financial regulators cautioned investors to be wary.
PlexCoin is among one of many ICOs trying to seize the moment, but it is facing an uphill battle.
The Autorité des marchés financiers (AMF) filed a motion this week before Quebec Superior Court seeking contempt of court charges against Lacroix for failing to comply with orders issued by the Tribunal earlier this summer on July 20th, according to Théberge.
On July 20th, at the request of the AMF, the Tribunal issued a broad ex parte order forbidding Lacroix and his companies DL Innov inc. and Gestio inc from “engaging in activities for the purpose of directly or indirectly trading in any form of investment” covered by section 1 of the Quebec Securities Act (Act), either in Quebec or from Quebec to outside of the province. The Tribunal issued the same order against PlexCorps and PlexCoin. (An ex parte order is an order granted by a judge at the request of and for the benefit of one party only, without notice or challenge by the other party).
“We are visibly faced with a situation that resembles non-compliance of orders issued by the Tribunal,” said Théberge. “From all evidence, PlexCoin is not respecting any of the orders issued by the Tribunal because it appears they have solicited and still are soliciting investors.”
More recently still, on September 21st, following yet another application by the AMF, the Tribunal issued an order that forbids Dominic Lacroix, his company DL Innov inc. and his spouse Sabrina Paradis-Royer from directly or indirectly “disposing” funds, securities or other property in the safekeeping of another person who has them on deposit or in custody or in control of them, no matter where.
The Tribunal also issued an order that forbids Royal Bank of Canada, Shopify Inc., Shopify Payments Canada and Wells Fargo Canada Corp. from disposing funds, securities or other property they have on deposit or custody and control belonging to Lacroix, Paradis-Royer and DL Innov inc. The financial organizations have been cooperating with Quebec’s financial regulator, said Théberge.
In a filing dated September 20th, obtained exclusively by Law in Quebec, the AMF notes that in spite of the Tribunal’s July 20th order that barred Lacroix, DL Innov, Gestion inc, PlexCoin and PlexCorps from soliciting investments from the public, the internet sites plexcorps.com and plexcoin.com were in operation, accessible to Quebecers and continued to solicit funds. “Faced with the inaction of the defendants,” two warrants were executed on Lacroix’s home and DL Innov on August 2nd.
Investigators found in Lacroix’s home documents used to create the website plexcoin.com and PlexCoin’s white paper, according to the filing.
Invoices registered for the domain name of PlexCoin by web host provider GoDaddy, dated May 24, 2017 and addressed to Lacroix, were also found in the premises. In a computer used by one of DL Innov’s employees, a list of the 91,445 persons who were registered for PlexCoin’s presales was also found.
As well, a search of DL Innov’s employee’s cell phone revealed a text message from Lacroix sent on June 14, 2017. The message stated: “Don’t forget that when you talk about plex it’s not me who is behind it. You don’t know who it is. You just saw it from somewhere. It must be super private.”
None of the allegations made by the AMF have been proven in court.