Two golden coins - Bitcoin and Ethereum
© lightboxx / 123RF Stock Photo

The operators of a failed crypto-asset mining venture have agreed to monetary penalties, disgorgement and market bans in a settlement with the Ontario Securities Commission (OSC).

An OSC hearing panel approved a settlement with First Class Crypto Inc. (FCCI) and the three men behind the firm.

Neill Kloss, Mitchell Carnie, and Johnathan Harris admitted to violating securities laws in raising about $364,000 from investors to set up a crypto mining operation. The fundraising effort included online marketing, weekly investment seminars and a booth at a flea market in Pickering, Ont.

They admitted to breaching securities laws by engaging in unregistered trading, illegally distributing securities and misleading investors.

Under the settlement, they agreed to pay almost $240,000 in fines and disgorgement, and to pay $25,000 in costs.

Additionally, FCCI was permanently prohibited from trading, Harris was banned for 12 years, Carnie received a seven-year ban, and Kloss was banned for five years.

In approving the settlement, the panel noted that the misconduct was serious.

“The registration and prospectus requirements, as well as the prohibitions against making false and misleading statements, are core to the investor protection objectives of the [Securities Act],” it said.

“In particular, the failure to keep accurate and complete books and records is of significant concern to the protection of investor interests. This concern is heightened when operating in the crypto asset sector,” it said.

The panel also acknowledged that the three are “unsophisticated and inexperienced individuals” who have never been registered, and that they’ve “demonstrated some recognition of the seriousness of their misconduct” by attempting to repay investors, among other things.