Suspected PlexCoin founders agree to pay nearly US$7 million

Dominic Lacroix and Sabrina Paradis-Royer lived the good life, while it lasted. He leased a $140,000 luxurious Mercedes Benz and bought a T-Rex, a three-wheeled sports car manufactured by a now bankrupt Canadian company. He purchased a $2.52 million home in a chic neighborhood in Quebec City, and then poured nearly half a million dollars in renovations. And he amassed a healthy fortune, hovering around US$3.3 million, not counting 1,677 bitcoins and other virtual currencies, in the span of a couple of months.

Continue reading “Suspected PlexCoin founders agree to pay nearly US$7 million”

U.S. SEC obtains another order to freeze assets of alleged PlexCorps founder

The noose is tightening around Dominic Lacroix, a Quebec City businessman believed by Quebec’s financial watchdog and the U.S. Securities and Exchange Commission to be behind PlexCorps, a controversial cryptocurrency start-up accused of fraudulently selling millions of dollars’ worth of digital assets.

Nearly a month after Lacroix was ordered by the Quebec Financial Markets Administrative Tribunal to hand all bitcoins in his possession, the SEC obtained on June 15, 2018 a second emergency court order freezing his assets.

On December 2017, the SEC had filed securities charges, and obtained an emergency asset freeze, against Lacroix, described as a “recidivist” Quebec securities law violator, his partner Sabrina Paradis-Royer and PlexCorps.

The SEC returned to the federal court in Brooklyn, New York this month because Lacroix allegedly has been using secret accounts, including an account in his brother’s name but which he controlled, to “improperly dissipate” for personal use monies he obtained from investors during the PlexCoin Initial Coin Offering. U.S. District Judge Allyne Ross granted the emergency freeze asset after finding there was a grave risk that Lacroix would siphon monies he obtained from PlexCoin investors.

The SEC original complaint alleges that from August 2017 to December 1, 2017, PlexCorps, Lacroix and Paradis-Royer “purportedly” obtained $15 million from thousands of investors through “materially false and misleading statements” made by Lacroix and through entities Lacroix controls. The complaint  alleges that he promised investors returns of 1,354% in under 29 days. The complaint further alleges that Lacroix and Paradis misappropriated investor funds and engaged in deceptive acts relating to PlexCoin.

On May 24, 2018, the Quebec Financial Markets Administrative Tribunal issued new freeze orders against Lacroix and Paradis-Royer — on top of the ones they already face — in a bid to protect the public and prevent them from transferring or “squandering” monies in their possession.

Lacroix was found guilty last October of contempt of court for failing to adhere to broad ex parte orders issued by the Tribunal on July 2017 that forbade him and his company DL Innov Inc. from trading in any form of investment. On December 2017, he was sentenced to a two-month jail term and fined $10,000 for contempt of court while DL Innov was fined $100,000. Both rulings have been appealed.

In 2013, Lacroix pleaded guilty to six counts of “illegal placement, illegal practice, and transmission of false or misleading information” and was fined $25,000.

Alleged PlexCorps founder ordered to hand bitcoins to Quebec financial watchdog

A Quebec City businessman believed by Quebec’s financial watchdog and the U.S. Securities and Exchange Commission to be behind PlexCorps, a controversial cryptocurrency start-up accused of fraudulently selling up to millions of dollars’ worth of tokens, has been ordered to hand all bitcoins in his possession within 48 hours, ruled the Quebec Financial Markets Administrative Tribunal.

The Tribunal, in a ruling that will likely create precedence given the dearth of case law, also issued new freeze orders against Dominic Lacroix and his spouse — on top of the ones he already faces — in a bid to protect the public and prevent them from transferring or “squandering” monies in their possession.

“Cryptocurrencies have changed the approach the Tribunal must adopt in order to protect the sums held in this manner because there exists no other third party like a financial institution to ensure the respect of decisions issued by a tribunal,” said the two-member panel of the Tribunal in a ruling issued on May 24th.

The Tribunal felt then “it had no choice but to innovate in the application” of article 249 of the Quebec Securities Act. The article stipulates that that the Autorité des marchés financiers (AMF), Quebec’s financial regulator, may for purposes of an investigation request the Tribunal to order a person to refrain from disposing funds, securities or other assets in his possession. By its own admission, the Tribunal noted that article 249 did not have enough bite. Lacroix, the Tribunal pointed out, repeatedly ignored orders against him. The Tribunal, as a result, turned to article 94 of the Act respecting the Autorité des marchés financiers which allows for the Tribunal to “take any measure conducive to ensuring compliance.”

“In the opinion of the Tribunal, this article gives it the possibility to adjust an order that would be adapted to the virtual reality of bitcoins,” said the Tribunal “It is clear that new technologies and new ways of holding assets pose important challenges to those responsible upholding the application of the law.”

Faced with an “exceptional situation,” the Tribunal adopted a “large and liberal” interpretation of article 94 that allowed it to take measures just as exceptional to protect investors. In this vein, the Tribunal “believes it is justified” to use the powers conferred to it under article 94 to order Lacroix to transfer bitcoins in his possession to the Quebec financial watchdog but only to safeguard it, and not as the AMF hoped to sell them.

Lacroix was found guilty last October of contempt of court for failing to adhere to broad ex parte orders issued by the Tribunal on July 2017 that forbade him and his company DL Innov 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, either in Quebec or from Quebec to outside of the province. On December 2017, he was sentenced last year to a two-month jail term and fined $10,000 for contempt of court while DL Innov was fined $100,000. Both decisions have been appealed.

In spite of the orders issued against him over the past year, the Tribunal found that Lacroix has used his entourage, including his spouse, his brother and his employees, to circumvent “by all means possible” the restraint orders issued against him.

On April 23, 2018, PlexCoin wrote in its Facebook page that “we assure to these people that 100% of the money used to buy their PlexCoin, by credit card, is still in the bank accounts and ready to be used to pay you back, we have proposed this option to the SEC and the AMF but we still have not received their agreement for the process.”

Yet the Tribunal notes that in spite of this statement, evidence revealed that amounts obtained from investors who used their credit cards to purchase PlexCoins were deposited in Lacroix’s bank accounts with CIBC and Tangerine and used for personal purposes. Further evidence revealed that Lacroix and his spouse paid more than $100,000 to suppliers who worked on his luxurious $2.5 million home in Quebec City. As well, evidence also revealed that Lacroix and his spouse spent in the space of a couple of months 314.75 bitcoins to “maintain a luxurious lifestyle” in part by monies obtained from PlexCoin investors.

According to an AMF investigation, the PlexCoin initial coin offering generated US$3.3 million, 1,677 bitcoins. Testimony provided by an AMF investigator alleges that Lacroix still controls 464.22 bitcoins as of May 7, 2018. The value of each bitcoin at that date is estimated to be between $9,000 and $12,000. All told, according to the investigator, Lacroix has more than US$4 million in bitcoins.

“To ensure that the bitcoins held or under Lacroix’s direct or indirect control are preserved, the Tribunal has no choice under the circumstances but to order Lacroix to transfer to a third party, in this case the regulator, the AMF, his bitcoins,” said the Tribunal. “Prime facie evidence revealed to the Tribunal leaves it with no alternative in this case given the repetitive wrongdoing attitude demonstrated by Lacroix.”

The Tribunal also ordered the Bank of Montreal, Tangerine, Caisse Desjardins de Charlesbourg and the CIBC to refrain from disposing funds, securities or other assets belonging to Lacroix or his spouse.

Suspected PlexCoin founder sentenced to two months in prison

Dominic Lacroix, a Quebec City businessman believed by Quebec’s financial watchdog and the U.S. Securities and Exchange Commission to be behind PlexCorps, a controversial cryptocurrency start-up accused of fraudulently selling up to $15 million of tokens, was sentenced to two-month jail term and fined $10,000 for contempt of court.

“The defendants fully understood the orders but intentionally and voluntarily disrgarded them,” said Quebec Superior Court Justice Marc Lesage in a 15-page ruling dated December 8th. “The Court finds that this is a case of exteme case of contempt and bad faith by the defendants.”

Lacroix and his company DL Innov inc. were found guilty in mid-October by Justice Lesage of failing to respect broad ex parte orders issued by the Quebec Financial Markets Administrative Tribunal on July 20th that forbade them 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, either in Quebec or from Quebec to outside of the province. DL Innov inc. was fined $100,000 for the same offense. Both Lacroix and DL Innov have three months to pay the fine.

Search warrants conducted by the Quebec’s financial regulator, the Autorité des marchés financiers (AMF), at Lacroix’s home and the offices of DL Innov inc. uncovered exchanges Lacroix had with one of DL Innov’s employees between July 25th and July 28, 2017. According to Justice Lesage, it revealed the “cavalier” attitude they had towards the court orders and “their intention not to follow them.” Among other things, they said:

  • “These are administrative procedures ordered by a juge. We don’t care about the AMF.”
  • “Our target audience is…those who don’t understand crypto.”
  • “We received another summons by the AMF. They won’t give up, there must be no traces.”

On December 1, the U.S. Securities and Exchange Commission filed charges against Lacroix, a “recidivist” Quebec securities law violator, his partner Sabrina Paradis-Royer and his company PlexCorps. The SEC’s complaint charges Lacroix, Paradis-Royer and PlexCorps with violating anti-fraud provisions, and Lacroix and PlexCorps with violating the registration provision, of U.S. federal securities laws. The complaint seeks permanent injunctions, disgorgement plus interest and penalties.

The SEC also obtained an emergency asset freeze against PlexCoin, a controversial “fast-moving” and “purported” initial coin offering (ICO) that has raised up to $15 million from thousands of investors since August 2017.

U.S. SEC files charges against PlexCorps

The U.S. Securities and Exchange Commission has obtained an emergency asset freeze against PlexCoin, a controversial “fast-moving” and “purported” initial coin offering (ICO) that has raised up to $15 million from thousands of investors since August 2017.

The SEC also filed charges against Dominic Lacroix, a “recidivist” Quebec securities law violator, his partner Sabrina Paradis-Royer and his company PlexCorps, according to a new filing dated December 1, 2017 in Brooklyn, New York.

The SEC’s complaint charges Lacroix, Paradis-Royer and PlexCorps with violating anti-fraud provisions, and Lacroix and PlexCorps with violating the registration provision, of U.S. federal securities laws. The complaint seeks permanent injunctions, disgorgement plus interest and penalties. The SEC is also seeking an officer-and-director bar for Lacroix as well as a bar from offering digital securities against Lacroix and his partner Paradis-Royer.

Initial coin offerings have become a bonanza for digital currency entrepreneurs in spite of increased attention from regulators. So far, ICOs have raised US$3 billion in 2017 thanks to more than 200 offerings held during the course of the year, according to data obtained from CoinSchedule.

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. Indeed, the SEC established last September a cyber unit to keep an eye on ICOs, distributed ledger technology, the spread of false information through electronic and social media, and hacking and threats to trading platforms.

PlexCoin caught the attention of Quebec’s financial watchdog this summer which unsuccessfully tried to stop its ICO. The SEC’s complaint does not mince words.

“This is an emergency action to stop Lacroix, a recidivist securities law violator in Canada, and his partner Paradis-Royer, from further misappropriating investor funds illegally raised through the fraudulent and unregistered offer and sale of securities called ‘PlexCoin’ or ‘PlexCoin Tokens’ in a purported Initial Coin Offering,” affirms the 35-page SEC complaint.

The SEC complaint alleges that from August 2017 to December 1, 2017, PlexCorps, Lacroix and Paradis-Royer “purportedly” obtained $15 million from thousands of investors through “materially false and misleading statements” made by Lacroix and through entities Lacroix controls such as promising investors returns of 1,354% in under 29 days. The statement further alleges that Lacroix and Paradis misappropriated investor funds and engaged in deceptive acts relating to PlexCoin.

The false and misleading statements, according to the SEC’s statement, include:

  • Lacroix and PlexCorps asserted that their team consisted of a growing cadre of experts stationed around the world, and that the principal place of business was in Singapore.

In fact, the SEC asserts that “Lacroix knew or recklessly disregarded, PlexCorps and PlexCoin are a scam” because there is no PlexCorps team other than a handful of Lacroix’s employees in Quebec.

  • According to Lacroix, the identity of PlexCorps’ executives were kept hidden to avoid poaching by competitors.

In fact, the SEC states that the reason why PlexCorps did not disclose the identity of its principal executive was because Lacroix was a known recidivist securities law violator in Canada.

  • Lacroix said that the proceeds of the PlexCoin ICO would be used to develop other PlexCorps products.

The SEC alleges that the proceeds from the PlexCoin ICO were intended to fund Lacroix and Paradis-Royer’s expenses including home décor projects.

The funds fraudulently raised during the PlexCoin ICO have been channeled through various fiat currency accounts belonging to Lacroix and Paradis-Royer and through cryptocurrency addresses under their control on various blockchains, according to the SEC statement.

Of the 81 million PlexCoins purchased, approximately $810,000 is currently held in three accounts to which Lacroix and his associates will soon gain access, alleges the SEC. The SEC also alleges that Lacroix and Paradis-Royer have misappropriated or attempted to misappropriate at least $200,000 of these amounts on “extravagant” personal expenditures.

“PlexCoin is and was a fraud aimed at enriching” Lacroix and Paradis-Royer, plainly states the SEC in its statement.

PlexCorps disputes the charges. “We are being depicted as robbers, scammers and fraudsters everywhere in the media. They are smearing our name with some allegations that can sometimes be false or misleading,” it said in a Facebook posting dated December 4th.

PlexCorps also states that it will be cooperating with Quebec’s securities regulator, the Autorité des marchés financiers, and the SEC “until the end of the investigation.”

Lacroix’s legal hurdles are from over. Earlier this fall, he was found guilty of contempt of court. He is now awaiting his sentence.

Quebec financial watchdog raids offices of man prohibited from promoting PlexCoin

The Quebec financial watchdog raided last week the offices of Dominic Lacroix, a Quebec City man who has been prohibited by a tribunal to promote and solicit investors for a new virtual currency called PlexCoin.

The raid turned up a list of people from around the world, including Quebec, the U.S., and Africa, who expressed an interest in investing in PlexCoin, said Sylvain Théberge, a spokesperson with the Autorité des marchés financiers (AMF), the regulatory and oversight body for Quebec’s financial sector.

On July 20, 2017, at the request of the AMF, the Quebec Financial Markets Administrative Tribunal issued a broad ex parte 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 the 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 to or contestation by the other party.)

The AMF alleges that Lacroix, among others, have not complied with the orders issued by the tribunal. As a result it is now considering whether to launch penal proceedings against Lacroix and his companies before the Court of Quebec (a provincial court) or to hand the case over to police authorities. “We are now in the midst of examining all our options,” said Théberge.

In a filing before the Tribunal obtained exclusively by Law in Quebec, the AMF revealed that it began its investigation on Lacroix, Dl Innov and other companies affiliated with him on May 8, 2017. On July 4, 2017, the AMF’s investigation branch received an anonymous tip about PlexCorps. The person “sought to bring to the AMF’s attention” that PlexCorps was seeking public financing while boasting high returns, without a prospectus.

In its filing, the AMF argued that investing in PlexCorps by purchasing PlexCoin “constitutes an investment contract” as per the Quebec Securities Act, and that neither PlexCorps nor PlexCoin registered with the AMF as a securities dealer as required by the Act. The filing also notes that PlexCorps and PlexCoin did not submit a prospectus to the regulator as required by the Act. It points out that neither PlexCorps nor PlexCoin has a “legal existence” in Canada or Quebec, and that no such organization can be found in the widely-used company database web site opencorporates.com.

In its filing, the AMF alleges that PlexCoin actively participated in a French-language forum entitled cryptofr.com. According to the filing, an AMF investigation shows that discussions emanating from PlexCoin about the virtual currency in the French-language forum stems from an internet protocol address that is linked to DL Innov Inc, a Quebec City firm that was established as a holding company on December 2012 under the Quebec Business Corporations Act. DL Innov has never registered with the AMF as a securities dealer.

The filing also notes that in discussions about PlexCoin in the French-language forum, PlexCoin itself stated that “Gestio Inc., a company related to DL Innovo Inc, was mandated to manage the French-language social network of PlexCorps.” Gestio inc., a registered Quebec City company established on February 2013, operates in the IT sector and conceives and leases management software. Gestio Inc.’s major shareholder is DL Innov, and its president, secretary and treasurer is Domenic Lacroix. Like DL Innov, Gestio and Lacroix did not register with the AMF as a securities dealer.

The Tribunal ordered Lacroix, DL Innov, Gestio, PlexCorps and PlexCoin to withdraw advertisements or solicitations on the internet or elsewhere relating to securities or any forms of investment, published or distributed by them directly or indirectly on the internet or elsewhere.

In issuing its broad ex parte orders, the tribunal notes that it was important to render a quick decision to protect the public.

Quebec financial watchdog considering its options over PlexCoin

Quebec’s financial watchdog is considering handing over the case involving Dominic Lacroix and his companies, who have been prohibited by a tribunal to promote and solicit investors for a new virtual currency called PlexCoin, to police authorities.

The Autorité des marchés financiers, the regulatory and oversight body for Québec’s financial sector, is also considering launching penal proceedings against Lacroix and his companies, said Sylvain Théberge, AMF’s spokesperson. Such proceedings would take place before the Court of Quebec, a provincial court.

“We are talking about thousands of people who have shown an interest in this system,” said Théberge, adding that a decision as to whether to call in police or refer the matter for penal proceedings will take place this week. “We are extremely concerned. It seems to us, until the contrary is proven, that investors may become involved in a high-risk investment.”

On July 20, 2017, at the request of the AMF, the Quebec Financial Markets Administrative Tribunal issued a broad ex parte 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 the section 1 of the Quebec Securities Act, either in Quebec or from Quebec to outside of the province. The tribunal issued the same order against PlexCorps and PlexCoin.

(The decision by the Tribunal has yet to be published. 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 to or contestation by the other party.)

The Tribunal also ordered them to pull out advertisements or solicitations on the internet over any securities or investment vehicles. The Tribunal also ordered them to shut down the site plexcorps.com and plexcoin.com – or at the very least make them inaccessible to Quebec consumers. As of today, both web sites are still operating.

“We have an individual who up until today has decided not to respect the orders issued by the Tribunal,” said Théberge. “Behind PlexCoin in Quebec, it is Dominic Lacroix and his team who manage the site. He is the one looking after the advertising in Facebook. He is the one who is involved here in Quebec, through his Quebec companies, of attracting investors towards these operations.”

PlexCoin is a group of forty people, including programmers, engineers, and cryptocurrency specialists, “all independent” located throughout the world, according to its Facebook account. It recently published a white paper that ostensibly “explains all the details” of the PlexCoin project and supposedly “contains information” about the funding project.

Details about the people behind the project have been excluded in the white paper. In the introduction of the white paper, there is a signature etched above the word president of PlexCorps but it is indecipherable. The spelling of the word president is written in French, and beside it are the initials DG which may mean director general or directeur général in French.

Quebec’s financial regulator is also holding discussions with Facebook. Facebook Canada Ltd. was ordered by the Tribunal to shut down the Facebook pages of PlexCorps and PlexCoin. Facebook declined to comment. “We can’t share details about cases,” said a Facebook spokesperson.

“The problem is that Facebook is located in the U.S.,” said Théberge. “We are holding talks with them. Their lawyers have been informed about the case.”

In a wholly unrelated case, Lacroix was the target of another order by the Tribunal, again at the AMF’s request. The Tribunal issued on June 13, 2017 ex parte freeze and prohibition orders against Lacroix, Régis Roberge, DL Innov inc., Micro-Prêts inc. and Gap Transit inc. in connection with failures to comply with the Securities Act.

On June 29, 2017, the Tribunal partially rescinded its far-reaching order after an agreement was reached between the AMF and the parties.

Earlier still, on February 2013, Lacroix and his company Micro-Prêts plead guilty before the Court of Quebec to six charges of illegal distribution, illegal practice and misrepresentations. The Court ratified the parties’ joint proposal and imposed a $25,000 fine.

“All of this demonstrates that this is an individual, who even though he has been sanctioned, does not seem to understand,” said Théberge. “So we are faced with a potential repeat offender.”