ASC sets 2025 hearing over alleged fraud and regulatory breaches by Catalyx and former executives
The Alberta Securities Commission (ASC) has issued a Notice of Hearing against CatalX CTS Ltd., operating as Catalyx, along with Hyuek Jae Park and Jae Ho Lee.
At the time of the alleged misconduct, Lee served as chief financial officer and Park as chief executive officer.
The Notice of Hearing alleges that Lee perpetrated a fraud on clients of Catalyx and that the company failed to comply with a written undertaking it had given to the ASC.
That undertaking permitted Catalyx to continue operating in Canada while its application for registration as an authorized crypto asset trading platform (CTP) was under review by the Commission.
At the time, CTPs operating in Canada were required to sign a pre-registration undertaking in order to remain in operation during the registration review process. The undertaking included terms and conditions designed to address investor protection concerns.
The Canadian Securities Administrators website provides further details about CTP regulation.
The Notice of Hearing states that starting in February 2019, Lee withdrew at least $14,030,000 worth of clients’ crypto assets from the Catalyx platform and transferred them to accounts under his control at other CTPs.
He returned some crypto assets to the Catalyx platform, but a substantial shortfall remained.
The allegations also include misappropriation of clients’ fiat currency deposits for unauthorized purposes.
By November 24, 2023, Park was aware that Lee had committed fraud against Catalyx clients.
However, Catalyx did not inform the ASC of this material breach of its written undertaking until December 21, 2023.
The Notice further alleges that Catalyx failed to establish, maintain, and apply the policies and procedures necessary to manage and mitigate the risk of employee misappropriation of client fiat currency and crypto assets intended to be held in trust.
These allegations have not been proven in a hearing. An appearance to set a hearing date is scheduled for September 15.
