Crypto company wrong to cancel options, court finds

By James Langton | September 20, 2023 | Last updated on September 20, 2023
3 min read

An Ontario court has upheld a lower court’s ruling that a company acted improperly when it denied options grants to a couple of consultants after the company’s board had approved the options.

The Court of Appeal for Ontario ruled against crypto company DeFi Technologies Inc., and confirmed a decision by the Superior Court of Justice that the company’s management couldn’t unilaterally deny options grants that had previously been approved by its own board.

According to the court, in November 2020, the company’s board unanimously approved a grant of 750,000 options to an advisor to the company, Joseph Weinberg. The stock option grant was publicly announced, and was reported in the company’s filings to the Ontario Securities Commission (OSC).

However, when Weinberg, and his co-advisor, Zach Justein, tried to exercise some of the options in September 2021, they found that the grant had been cancelled on the basis that they didn’t meet the requirements of the option plan — that they weren’t consultants to the company as defined by the plan.

They sued over the cancelled options, and the court found in their favour, ruling that the power to determine eligibility for options grants lay with the company’s board — and, the lower court judge found that “the board resolution made the respondents eligible optionees, approved the grant of options, and recognized Mr. Weinberg as an advisor.”

The judge also found that the board never passed a resolution cancelling the option agreements, or determining that they were not eligible for the grants, and that it “could not have been a reasonable expectation that the agreement reached would have been unenforceable if DeFi’s management simply decided that the respondents were not consultants.”

As a result, the lower court judge awarded 750,000 options to the jilted advisors.

On appeal, the company argued that the lower court judge erred in her findings, and that she should have ruled on whether the advisors were eligible for options under the plan.

The appeal court rejected the company’s arguments, ruling that the judge took a “common sense approach” to the case.

“It was for the board to decide who was eligible to receive options. In this instance, the board clearly determined that the respondents were eligible in accordance with the resolution. We reject the suggestion that the application judge’s reasoning on this point is inadequate,” the appeal court said in its decision.

It also found that there’s no evidence that they shirked their responsibilities as advisors.

“While there was conflicting evidence about how much the respondents did or did not do for the company, the fact that they remained in an advisory role (whether they were utilized or not) was unchallenged,” the appeal court said.

The appeal court also rejected the company’s arguments about the judge’s approach to assessing damages in the case.

“We see no inadequacy in the reasoning on damages,” it said, adding that she chose among five possible methods for assessing damages that were proposed by the two sides in the case.

“She cannot now be faulted for choosing an option that was jointly suggested by the parties as a means by which to calculate damages,” the appeal court said.

Ultimately, the court dismissed the company’s appeal, saying, “In our view, the application judge did not err in coming to the conclusion that, in essence, the respondents were unable to exercise the options in accordance with the plan after the plan had been repudiated.”

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.