AXIA Project Update

[anenro]

AXIA Project Update

 
January 18, 2024



Dear Coin Holder,



We are writing with an update on the AXIA Project wind-down.



We are now down to the final steps to bring the AXIA Project into a formal liquidation process in the Cayman Islands and are able to provide additional detail on certain efforts made over the past six months. Significant time has been required to bring various companies within the AXIA Project into good standing such that they can be migrated to the Cayman Islands and merged to facilitate the orderly and centralized wind-down of the AXIA Project. While this has taken much more time than anticipated, in the absence of such steps, the liquidation of companies across various jurisdictions would have been a far more costly and inefficient process than what is currently expected.



As part of this process, we were able to sell the AXIA banking license, which required significant interaction with and the approval of the bank’s regulator. The sale process is largely completed netting USD$360,000, with final payments expected within the coming weeks.



We have secured all cash and digital assets belonging to the AXIA Project. This process was, in part, delayed because of the inexplicable refusal of one of the AXIA Project’s operating banks to release AXIA’s account holding approximately US$4 million. After months of negotiation and, eventual litigation, AXIA was able to successfully recover all of the cash held in that account, less non-material bank costs.


The corporate merger process is also nearing completion. AXIA Project entities in multiple jurisdictions have now been merged with the new Cayman entity. The Directors are completing the last step related to the final entity before appointing voluntary liquidators to the Cayman company.



On another front, AXIA is in the process of filing a claim against certain unrelated third parties for losses caused to AXIA in the amount of approximately US$3 million. Investigation and information gathering are ongoing, including identifying viable sources of recovery for this claim, and updates will be provided by the liquidators when available. The Directors also continue to monitor and engage, as appropriate, with the Axtra litigation filed against certain specific AXIA entities.



Once liquidation commences, the liquidators will attempt to monetize certain other assets of the Project.



Lastly, we have been made aware that the Ontario Capital Markets Tribunal has issued a Notice of Hearing, along with a Statement of Allegations by the Ontario Securities Commission (“SOA”) related to Nicholas Agar (“Agar”) and Paul Ungerman (“Ungerman”).



The Notice of Hearing states that the purpose of the hearing is to consider a Settlement Agreement dated January 10, 2024, between Staff of the Ontario Securities Commission (“OSC”) and Agar and Ungerman in respect of the SOA. As described in the SOA, the OSC began inquiries into matters related to the AXIA Project some time ago. The proposed settlement relates to OSC allegations that the distribution and promotion of the AXIA tokens violated Ontario securities laws following an investigation by the OSC.


These documents can be found at www.capitalmarketstribunal.ca/en/notices/notice-nicholas-agar-and-paul-ungerman-file-no-2024-1



Importantly, the OSC is not pursuing any remedies against any of the corporate entities affiliated with the AXIA Project at this time.



We look forward to entering the liquidation process and communicating with coin holders more frequently as information becomes available.



Sincerely,

AXIA Project Team




AXIA SYSTEMS INC.

Intershore Chambers

Road Town Tortola VG1110

VIRGIN ISLANDS, BRITISH

[anenro]

Crypto tokens were securities, the settlement says.

Tribunal accepts settlement with crypto project founders, including more than $1.5 million in sanctions.

By: James Langton January 30, 202412:30

The operators of a failed blockchain development project agreed to pay more than $1.5 million in sanctions and will be permanently banned over an unregistered offering of crypto tokens, which, they admitted, functioned as securities.

The Capital Markets Tribunal approved a settlement with Nicholas Agar and Paul Ungerman, the operators of Axia Project who admitted to violating securities law by distributing securities without a prospectus, trading without registration, and making misleading promotional statements.

According to the Ontario Securities Commission (OSC), the Axia Project raised approximately US$41 million from investors, including $9 million in Ontario, from the sale of crypto tokens Axia Coins. The tokens were supposed to be used as the medium of exchange on its planned blockchain platform. However, the regulator alleged that they promoted the tokens as investments, too.

In the settlement, Agar and Ungerman admitted that the tokens served as securities, that they were issued without a prospectus, and that they traded without registration.

In its reasons, the tribunal noted that the agreement marks the first time the OSC has settled allegations relating to the promotion and sale of crypto tokens, and that the tribunal hasn’t ruled on any cases involving the sale of crypto tokens and whether they count as securities.


“While we have not had the benefit of detailed argument concerning the attributes of the Axia Coin, we are satisfied that the parties to this settlement agreement have admitted and agreed to circumstances that justify the imposition in the public interest of sanctions related to the promotion and sale of the coin and rights to receive the coin in future,” the panel said.

The project’s founders also admitted to making misleading statements about the purported assets backing the tokens — including that it held over US$29 billion in reserves — and to making misleading statements to regulators about the project, which prevented early detection of the misconduct.

In late 2022, the Axia Project was suspended and an outside governance and compliance firm was hired to review it. As a result of that review, in March 2023, the project was terminated and efforts to wind it down were started, with the remaining funds to be returned to investors.

The tribunal said the effort to wind down the project and return money to investors was a mitigating factor in the case, along with the fact that the respondents cooperated with the regulator’s investigation and accepted responsibility for their misconduct by reaching a settlement.

To settle the OSC’s case, Agar and Ungerman each agreed to pay $550,000 penalties. Ungerman agreed to disgorge $318,686 to the OSC, and Agar agreed to disgorge $50,000. Both men also agreed to pay $50,000 in costs.


Ungerman has paid the sanctions ordered against him, and Agar has paid $200,000, with the balance to be paid in nine monthly installments.

In addition to the financial sanctions, they also agreed to permanent trading bans, director and officer bans, and registration bans.

“In our view, given the mitigating factors, the significant financial sanctions, the permanent market bans, Agar’s irrevocable direction, and the avoidance of the time and expense required for a contested hearing, it is in the public interest for us to approve the settlement,” the tribunal said in its reasons.

“The settlement will, in our view, achieve specific and general deterrence and convey a strong message to market participants that compliance with Ontario securities laws is required in the context of the promotion and sale of cryptocurrency tokens.”


#AXCFRAUD #NICKAGAR #AXCSUSPENDED #NICHOLASAGARSCAM #AXIAPROJECT    

[anenro]

OSC settles allegations relating to cryptocurrency tokens
Alexander CobbAndrew Rintoul
Topics: Regulatory Compliance and Enforcement
Feb 7, 2024


On January 26, 2024, Ontario’s Capital Markets Tribunal (the Tribunal) approved a settlement [PDF] in the matter of Nicholas Agar and Paul Ungerman (the respondents), representing the first time the Ontario Securities Commission (OSC) has settled allegations relating to the promotion and sale of cryptocurrency tokens.

Although the Tribunal was clear that it was not adjudicating whether a cryptocurrency token constitutes a security, this matter highlights the OSC’s commitment to enforcing the Securities Act (the Act) in respect of cryptocurrency assets, notwithstanding that the status of such assets under the Act is still unclear.

Background
As is typically the case in OSC settlements, the settlement agreement came before the Tribunal on the basis of a set of agreed facts. The parties agreed that between 2018 and 2022, the respondents and the corporate entities they controlled (the Axia Entities) created and raised approximately US$41 million from investors worldwide through the sale of cryptocurrency tokens (Axia Coin), including US$9 million from over 200 Ontario investors (the Axia Project). The respondents facilitated the sale of Axia Coin and/or future entitlements to Axia Coin to Ontario investors in various ways. The Axia Project was initially operated through an Ontario company controlled by the respondents before moving offshore in 2019.

The respondents continuously disseminated promotional materials for Axia Coin and actively promoted its profitability, including claims about its unique “tokenomics” that allegedly provided a “safe haven” for purchasers and increased the value of Axia Coin over time. The respondents also promoted that Axia Coin had a purported asset reserve of US$29 billion, was the world’s first asset-supported or -backed global cryptocurrency and would be tradeable on a trading platform to be built on their network. At the time, Axia Coin was traded on third-party exchanges with promises of listings on further exchanges.

In October 2022, the respondents announced the suspension of all Axia Coin sales. In March 2023, they announced the beginning of efforts to wind down the Axia Project. As part of this wind down, less than US$10 million of the US$41 million raised remained for distribution to investors.

The settlement agreement
On January 10, 2024, OSC Staff issued a Statement of Allegations alleging that the respondents committed various breaches of the Act in connection with the Axia Project and that they misled Staff in the course of Staff’s investigation into the matter. Also on January 10, 2024, the parties entered into a settlement agreement [PDF].

In this agreement, the respondents acknowledged and admitted that they, and Axia Entities as applicable: (i) made misleading or untrue statements in contravention of ss. 126.2(1) of the Act, (ii) breached the registration and prospectus requirements under ss. 25(1) and s. 53 of the Act, (iii) made a number of misleading, incomplete or untrue statements to OSC Staff about the nature and extent of the business activities of the Axia Project in contravention of ss. 122(1)(a) of the Act, (iv) authorized, permitted or acquiesced in Axia Entities’ non-compliance in contravention of s. 129.2 of the Act and (v) engaged in conduct contrary to the public interest.

The parties agreed that

Axia Coin are securities
the respondents and Axia Entities engaged in the distributions of securities without filing a preliminary prospectus or prospectus and without an applicable exemption from the prospectus requirement
the respondents and Axia Entities engaged in, and held themselves out as engaging in, the business of trading in securities without being registered to do so and without an applicable exemption from the registration requirement
Each of the respondents agreed to pay an administrative penalty of $550,000 to the OSC, as well as disgorgement and a contribution toward the cost of Staff’s investigation. They also agreed to lifetime trading and officer/director bans.

The Tribunal’s reasons for approval
The Tribunal approved the settlement, finding that the terms of the settlement agreement fall within a range of reasonable outcomes in the circumstances and that the agreement properly reflects the principles underlying the application of sanctions, including recognition of the seriousness of the misconduct and the importance of fostering investor protection and confidence in the capital markets.

In reaching this conclusion, the Tribunal noted the novelty of the matter, including that it represents the first time the OSC is settling allegations relating to the promotion and sale of cryptocurrency tokens and that the Tribunal has not previously decided any contested matters in relation to the promotion and sale of cryptocurrency tokens or the circumstances in which they may be considered a security. For the purpose of the settlement agreement, the parties agreed that the tokens were securities. The panel noted that they had not had the benefit of argument over the attributes of the token and whether it is properly characterized as a security. Nevertheless, the panel held that the parties had “admitted and agreed to circumstances that justify” the imposition of the agreed-upon sanctions.

Key takeaways
While the impact of this settlement on future OSC investigations and Tribunal decisions relating to cryptocurrency tokens remains to be seen, it nonetheless reinforces the seriousness with which the OSC will treat contraventions of Ontario securities laws in the context of cryptocurrencies and the enforcement of those laws irrespective of where businesses are domiciled.

[congregatio]

so its finally all done?

[lairezippert]

seems to be a typical way a lot of new coins will go