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An Alberta cryptocurrency promoter who created an investment service he called WhaleClub has been banned from trading for at least eight years and ordered to pay $165,000 in fines and costs by the Alberta Securities Commission (ASC).
Man banned for eight years must pay $165,000 after WhaleClub crypto investment stalls
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It found that Jan Cerato, also known as Jan Strzepka, raised more than $200,000 from at least 16 investors but failed to submit a prospectus outlining to them the risks the investments would entail.
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In a September 19 rulinga three-person ASC panel noted that providing a prospectus was a “fundamental protection” for potential investors.
“The prospectus requirement … allows investors to make informed investment decisions by providing them with full, true and easy disclosure of material information to assess the risks of an investment,” the panel’s ruling said.
“WhaleClub members were exposed to significant financial risk that they did not fully appreciate when they invested.”
WhaleClub later failed and those investors lost thousands, getting back between 10 and 40 percent of their original investment, according to the ruling.
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Cerato was ordered to pay a $40,000 fine and to cover $125,000 in investigation and hearing costs.
“Cerato’s actions toward investors demonstrated a significant risk of future misconduct and thus an increased need for deterrence,” the panel found.
“Cerato poses a significant risk to investors and the capital market.”
The ASC found that Cerato did not directly benefit financially from the schemes, but may have used WhaleClub as a means of promoting other business opportunities.
When contacted by Postmedia, he did not agree to an interview and instead referred to several blog posts in which he claims to have been bullied by ASC and declares his innocence.
He did not respond to questions about whether he had paid the fines or intended to do so in the future.
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“A Big Embarrassment”
The ruling outlines how Cerato encouraged members of the public to join WhaleClub in December 2017 on condition of a minimum investment of $10,000.
The money was to be pooled and used to trade cryptocurrencies.
He told the investors that their funds would be used for 90 days, when they would then be repaid along with 75 percent of any profits, according to the ruling.
A promotion implied that an investment could double every few weeks, the ruling said.
“The WhaleClub investors were precisely the type of individuals who need the protection of prospectus-like disclosure,” the panel wrote.
One investor told the ASC he invested because “it all sounded too good to pass up.”
Another was convinced by Cerato’s assurance that he could profit from it regardless of whether Bitcoin’s value went up or down.
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“It’s been a huge embarrassment in my life in front of my friends and family,” another investor told ASC.
“Clear scare tactics”
In determining the sanctions, the ASC noted Cerato’s “belligerent contempt” towards investors following WhaleClub’s failure.
The warrant refers to several threatening texts he sent them, including one that read: “I know you are a rat and so do a lot of very dangerous people; Enjoy.”
Other messages threatened civil litigation in what the panel determined was a “significant” aggravating factor.
“We considered these communications to be an obvious intimidation tactic,” the ruling said.
“(They) reflected a contemptuous disregard for investors harmed by his misconduct, and a lack of accountability and acceptance of any responsibility for his actions.”
In addition to the fines, Cerato must also cease trading in or purchase securities, is prohibited from participating in investor relations and also from acting in a management or advisory role.
Those bans last for at least eight years and until he pays $165,000.
