Ex-rep’s crypto trading attracts SRO sanctions

By James Langton | April 2, 2024 | Last updated on April 2, 2024
2 min read
Gold and silver crypto currencies laying on a laptop
AdobeStock / Igor Faun

A former rep has been sanctioned over his personal crypto trading — which included sending more than $1 million to Alameda Research Ltd., the failed crypto hedge fund connected to FTX — and his role in helping a friend develop a crypto trading venture.

A hearing panel of the Canadian Investment Regulatory Organization (CIRO) approved a settlement with Sam Hsiao-Tse Yang, a former rep with RBC Dominion Securities Inc., who admitted to violating the self-regulatory organization’s rules through his involvement with the crypto sector, including undisclosed outside business activity and personal financial dealings with clients.

“This includes his own personal crypto trading, borrowing money from a client to finance this trading, selling his personal crypto holdings to clients, and engaging in an ongoing business relationship with a crypto trading related business,” the settlement noted.

According to the settlement, starting in 2019, Yang disclosed his personal crypto trading to his firm, which was approved by the firm, subject to certain conditions.

However, it said that “he failed to disclose that he was involved in helping develop a crypto trading related business with a friend. This would eventually lead to the establishment of Heartbeat Capital Ltd.,” it said, noting that while he was involved with the company, he had no ownership stake in the firm.

According to the settlement, in August 2021, “RBC’s anti-money-laundering unit became concerned over large transactions moving through the respondent’s personal RBC banking account,” including over $1 million being deposited into his account by third parties, and a similar amount being wired to Alameda Research.

This prompted an investigation by the firm, which found that Yang was allegedly selling his personal crypto holdings to friends (including three clients) to get them started in crypto trading, that he’d borrowed money from a client to invest in crypto, and his ongoing involvement with Heartbeat Capital.

“The respondent engaged in outside business activities by engaging in cryptocurrency trading and carrying on an ongoing business relationship with a cryptocurrency related business,” the settlement said, adding that by selling his crypto to friends, and by borrowing from a client, he violated the rules against personal financial dealings with clients.

Following the investigation, Yang was terminated by the firm in November 2021.

According to the settlement, Yang’s involvement with crypto began before he became an advisor with RBC, and continued after he was terminated.

It also noted that he made a profit on his involvement with Heartbeat Capital, and that the loans he took from a client to help finance his trading were repaid with interest.

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James Langton

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