What? Me Worry?
Ontario Descends to Fishing for an Attack Surface vs. Ascension
by the CryptoWealth.com team
Special to L. Neil Smith’s The Libertarian Enterprise
This article is addressed to our CryptoWealth account holders and email list subscribers, and all those who may be interested in our project and products. We anticipate that it will become part of an ongoing series of public blog posts about the Ascension/Lyra project and the cryptocurrency industry in general.
Today we will be considering: 1) an alarming recent development; 2) some reflections on this development; and 3) what we can all do about it.
It has come to our attention that several people in our group who live in the GTA (Greater Toronto Area as natives call it) have recently received phone calls from a man named Craig Gallagher (not sure about spelling), who claims to work for the OSC. (The Ontario Securities Commission is essentially the counterpart of the Securities Exchange Commission (SEC) in the USA, only for the province of Ontario.) This fellow is asking questions about purchases and holdings of Lyra, seeking copies of marketing materials, etc. In plain English this is known as a fishing expedition, trolling for disgruntled buyers hoping to locate at least a few who might be willing to make a signed complaint, in order to supply a legal pretext for making trouble for everyone. (If anyone holding Lyra is in fact disgruntled or concerned about something, we hope that they'd let us know, like the people who got these calls did.) In other words, standard operating procedure for authorities tasked with tackling the threat posed by the cryptocurrency industry to the dominance of established interests and firms—more on this point later.
Our view is that anyone who contacts you asking impertinent questions about your private business deserves to be told to mind their own. “Am I obliged to answer your questions? No? Then forget it.” End of conversation. If you've purchased Lyra you've done nothing wrong. After all it's crypto, not cocaine. It's legal. But as any competent defense lawyer will tell you, there is absolutely nothing to be gained, ever, by “talking to the police.” And that goes double when you're wholly innocent.
Unfortunately we all live in an increasingly totalitarian world. Anyone much over 30 has probably witnessed a good deal of the deterioration, if they've been paying attention. (In a way that's kind of the whole point of crytpocurrency, to move the needle back the other way a bit; but again, more on that later.) Ontario is sadly no exception.
What Could Go Down
The OSC regulations provide that the commission can serve a summons to any Ontario resident to appear and answer questions, possibly (therefore probably) under oath. Moreover the recipient of such a summons is bound by an automatic gag order not to tell anyone about their summons. The complete OSC regs can be found here:
Sections 11-18 are relevant to investigations and summonses. If anyone has received a summons, they are effectively prohibited from notifying us, as we shall see (but mere phone calls are quite a different matter). So we don't expect to see any copies. However, the rules do stipulate what must be included. Section 13(1) reads:
A person making an investigation or examination under section 11 or 12 has the same power to summon and enforce the attendance of any person and to compel him or her to testify on oath or otherwise, and to summon and compel any person or company to produce documents and other things, as is vested in the Superior Court of Justice for the trial of civil actions, and the refusal of a person to attend or to answer questions or of a person or company to produce such documents or other things as are in his, her or its custody or possession makes the person or company liable to be committed for contempt by the Superior Court of Justice as if in breach of an order of that court.
The gag order part is contained in Section 16(1) which reads:
Except in accordance with
section 17, no person or company shall disclose at any time, except to his, her or its counsel,
(a) the nature or content of an order under section 11 or 12; or
(b) the name of any person examined or sought to be examined under section 13, any testimony given under section 13, any information obtained under section 13, the nature or content of any questions asked under section 13, the nature or content of any demands for the production of any document or other thing under section 13, or the fact that any document or other thing was produced under section 13.
So let's sum up: the laws of Ontario give these unelected government bureaucrats the ability to require anyone to testify under oath, even against themselves, and never to tell anyone (other than their attorney if they have one) what they were asked, what they answered, or even the fact that they were ever questioned at all. They might be wiser to make up a lie for their spouse, their boss at work, or anyone else to explain where they were that day. Stop and let that sink in for a moment.
What Could Be Done
If the OSC goes this route, and starts handing out summonses, rest assured the boilerplate language deployed will make a big deal out of the point above about being “liable to be committed for contempt by the Superior Court of Justice.” So it makes sense to take a look at the rules concerning contempt proceedings in civil actions. (Contempt in the case of criminal cases is a separate topic, and as we saw above the OSC has summons authority “as is vested in the Superior Court of Justice for the trial of civil actions”.) The Rules of Civil Procedure re contempt can be found here, in section 60.11:
Looking at this section, things suddenly appear a lot brighter and less scary. The most relevant bits are these:
(1) A contempt order to enforce an order requiring a person to do an act, other than the payment of money, or to abstain from doing an act, may be obtained only on motion to a judge in the proceeding in which the order to be enforced was made. R.R.O. 1990, Reg. 194, r. 60.11 (1).
(2) The notice of motion shall be served personally on the person against whom a contempt order is sought, and not by an alternative to personal service, unless the court orders otherwise. R.R.O. 1990, Reg. 194, r. 60.11 (2).
(3) An affidavit in support of a motion for a contempt order may contain statements of the deponent’s information and belief only with respect to facts that are not contentious, and the source of the information and the fact of the belief shall be specified in the affidavit.
So it turns out that “being liable to be committed for contempt” simply means that the OSC has the right (but not the obligation) to go before an actual judge and explain, by means of a signed affidavit (executed by the OSC agent under penalty of perjury, as with all affidavits), why the court should order the party summoned to comply with the summons, and/or punish them in some way for their non-compliance.
The judge has broad discretion in dealing with such a motion. He or she may dismiss it, perhaps on grounds that the summons was abusive or unjustified, or constituted an overreach of the OSC's authority. The judge can also uphold the summons, modify or limit it, even rewrite it completely. And yes, the judge can impose a fine or even a jail sentence (a few days is typical) for the failure of the witness to comply. But precisely because of these latter circumstances, the highest level of legal standards (as in a criminal case) must be upheld. For example, you cannot be compelled to be a prosecution witness, you are innocent until proven guilty, and contempt must be proved beyond reasonable doubt. And contempt can usually be purged before any punishment is imposed, simply by complying with the judge's order.
In other words the most likely results of failing to obey a summons from the OSC are these:
We don't know about you, but to us this series of events sounds much more favorable than just meekly going into the lion's den to testify under oath and be asked who knows what, by people who are likely hoping to catch you out in some misstatement or omission. Which they can then use to threaten you with perjury charges so they can “squeeze you” or “flip you,” and perhaps get you to testify (maybe even to lie) about someone else in order to save yourself from what's known as a “process crime.” Because sadly, that's how these kinds of fishing expeditions often work. (In the USA this style of investigation was just run for two years by a certain Mr. Mueller.) Agents are looking for their “scratch” to further their careers, and typically don't much care who gets railroaded to make it happen. And it's the ignorance of all the frightened folks who would never actually look anything up that makes the whole thing work, and lets the agencies get away with it all.
That said, only an attorney whom you have personally retained can offer you legal advice. We are not offering you any legal advice here, should you ever find yourself in this kind of difficult situation. We're just having a look at what the rules of play actually say, and making a few observations.
Agencies like the OSC and their big brother the SEC like to posture that their mandate is to protect the public. (And surely whatever abuses they might themselves commit must be worth it if the public is being protected, right?) Presumably loss due to fraud would be a big part of the definition of “from what” they're protecting the public. So since they seem to want to regulate crypto so much, let's have a look at their performance on that score in the crypto space thus far, shall we?
One of the benefits of being in the digital payments / crypto space as long as we have is that the scams are pretty easy to spot, because we've learned to recognize the signs. So let's go over a few:
So scammers have demonstrably run, and arguably continue to run rampant in Ontario, while the OSC is absent, not paying attention, or in a few high-profile cases posts very tardy warnings to make itself look good (or less bad), mainly based on regurgitating the research efforts of others. And yet, one place we now know they actually are deploying at least a little bit of their resources is: Ascension! The force of irony is strong with this agency.
What It Means
Well golly gee, we're downright honored. No, we mean it. Because focusing on a small, legitimate project with real technology, real people behind it, a history spanning nearly a decade, and real prospects for long-term success, while letting the crazy speculative orgy of enormous ponzi scams go along apparently unmolested, does show us a couple of interesting things. First of all, it shows us who they're really afraid of. Us! Not Onecoin, not USI-Tech, but us, Ascension and CryptoWealth.
Why is this? Hard to know for sure, but our mission statement itself might provide a clue. From our white paper, that mission is: “To promote the growth of robust, borderless, wealth generating, free market ecosystems.” This means an alternative economy not run by bureaucrats for the benefit of the financial firms, big banks and brokerages, establishment corporate infrastructure, and their donor class owners. And, one robust enough (for example, with sufficient privacy) to frustrate attempts by the oligarchs to take control of it.
Such a free economy would be anathema to the people that the OSC actually work for. It's also the fulfillment of the original vision of the cryptocurrency movement. And it hasn't died, despite all the scamsters and the bureaucrats over the years, the exploiters and the interferers. We're here to help complete that vision. We say so openly. And that of course is why we're dangerous.
The other thing the OSC's actions show us, far louder than their words, is that like all such agencies in every country, their claims to be working for the public interest are a total sham. Their true job is to protect their real bosses' turf and profits, while making sure that only people who are already rich get to invest in anything good, and that anything new which can't be co-opted into the fold gets nipped in the bud, if possible. Establishment attitudes toward crypto remind us of how the US Postal Service once lobbied Congress to require that all emails be delivered only through the Post Office. Hence the hostility toward bitcoin until Wall Street started trading in it. And hence the blitz against ICOs once they started cutting into the market for stock market IPOs. The problem wasn't the ICOs that were frauds, it was the ones that weren't frauds. Ask anyone who bought the recent IPO of Lyft, or the IPOs of Blue Apron or Snapchat before that, how well retail investors are protected via the IPO process. The investing public are the bagholders by design. The fact is, today there's no greater good where government is concerned. There is only greater greed for money and power.
Lest anyone think that we're picking on the OSC pretty hard here (okay, we are) we also enjoy picking on their American counterparts. Here's a rip-roaring article one of our associates from SilentVault wrote about the SEC a while ago: https://silentvault.com/tiki-read_article.php?articleId=8
And here's one about the tax agency in Australia getting its arms around tracking the crypto holdings of Aussies. If you can't prohibit it effectively, make it legal and tax it. Hey, it worked with weed!
What to Do
Hopefully, you find all this as motivating as we do. Sure, it sucks to have securities agents phoning your customers. It would suck even more if they start sending them summonses. But it's also flattering and gratifying in the sense that we're clearly getting somewhere. Anything legit that's worth an attack, no matter how small, by the corrupt establishment, must be worth finding out more about!
And there are lots of people who know it. Rest assured, this is a potentially huge marketing opportunity for us. We mean to give the OSC a refresher course on the meaning of the Streisand Effect. We know some investigative journalists who cover the crypto space that might be very interested in covering what's going on here.
So what can you do to help? You can help spread this article far and wide. Send it to your friends. Tweet out links to it (we'll be posting a copy of it on our website here: https://cryptowealth.com/assets/OSC-Streisand.pdf). If you don't yet own any Lyra, buy some. We take most major cryptos, some stablecoins, USD, and CAD. (Though it's conceivable we might need to stop accepting CAD in the future!) One caveat: because we don't sell to the general public, you do need to be referred by an existing account holder authorized to make introductions. (Try talking to the person who sent you this article.) And by the way, so much for any contention that we're selling unregistered securities to the public. We don't sell anything at all “to the public,” let alone securities.
If you have some Lyra already, please consider buying more. If Lyra isn't your thing, feel free to buy some of our own existing stablecoins backed by bitcoin, litecoin, gold, silver, USD, or CAD. All of these can coexist in our wallets. They can be spent between wallets without leaving visible traces on any blockchain, and can even be swapped anonymously p2p for other assets with other users, right inside our wallet app. You can even buy a license from Ascension to run your own digital currency issuer on our platform, or to operate an exchange, or an in-wallet store. This isn't futureware, you can do all this today!
This fits in nicely with the SEC's recent guidance for determining when a crypto token might be a security. The first and most important criteria are that the token's network is already deployed, and the token has some kind of a use case. Our network has been running continuously since 2010, and OTO/Lyra vouchers made their debut in late 2016. This guidance references the 1946 Howey case. We took that test too in 2017 using a worksheet prepared by a US law firm, and we passed! So are we worried that it will someday be proved that we're selling unregistered securities in Ontario? Nah, not really. In fact the very idea seems almost silly.
So in short, don't get scared by all this. But feel free to get mad. And then get busy!
The Ascension Team, via CryptoWealth Support
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