A former Vancouver resident is facing a hearing before the B.C. Securities Commission for allegedly creating an illegal cryptocurrency exchange administered by a non-existent Swiss-based foundation and promoted with a slew of misrepresentations.
Clayton Leigh Moore and NetCents Technology Inc. face allegations of breaking the B.C. Securities Act, according to a Monday hearing notice.
Moore is the founder of NetCents, a Vancouver-headquartered cryptocurrency payment processing company that traded on the Canadian Securities Exchange from 2016 until May 2021, when the commission halted trading when it said Moore made changes to the beneficial ownership or control of company shares without filing insider trading reports.
On Nov. 27, 2018, the commission froze $3.3 million of company assets derived from the sale of a cryptocurrency Moore created and sold in 2017, dubbed the NetCents Coin.
The commission alleges that the coin was an investment contract and thus security; however, Moore sold it without registering it with the commission (with a prospectus document or approved exemption).
Moore and the company proceeded to establish an exchange for investors to engage in the buying and selling of the coin. However, this action was undertaken without obtaining approval from the commission, as outlined in the notice.
Through it all, the commission says Moore and the company made misrepresentations to the public via its social media accounts and news releases.
NetCents said the commission purported to create the NetCents Coin Foundation to promote and administer the coin. Managing the coin network would be the NetCents Coin Organization, a non-profit the company advertised.
“Neither the NCC Organization nor the NCC Foundation, nor any similar independent entity existed during the distribution period and therefore could not have done any of the things NetCents claimed they did, and “all of the proceed from sales of the Coin went to NetCents.”
The company also issued news releases in November 2017 to claim the coin had sold out, but the commission alleges this was not the case.
In a YouTube video, the company claimed a monthly revenue of $100,000 when “NetCent’s financial disclosure indicated that its revenue for the entire fiscal year 2017 was less than $100,000,” the notice states.
“NetCents and Moore knew or ought reasonably to have known that the statements on its websites, and in the new releases and YouTube video were misrepresentations,” the commission alleges.
NetCents also established an online exchange named the NC Exchange, where customers opened accounts and submitted orders to buy and sell the coin. This was done without registering with the commission, the notice states.
Company denies allegations
Moore stated on Nov. 21 that the company “holds on record a written acknowledgment from the BCSC confirming that its operations were not deemed an illegal exchange before the implementation of new registration requirements, announced by the BCSC on Aug. 15, 2022, for all cryptocurrency exchanges.”
Moore has also taken issue with the “protracted nature” of the commission’s investigation, spanning almost five years. The company, stated Moore, is prepared to defend against the allegations.
“The Company anticipates that the outcome will reflect its dedication to compliance and the innovative spirit that drives the company,” stated Moore, who added that the company is registered as a Money Services Business (MSB) with Fintrac.
The notice stated that Moore resided in Vancouver during the alleged infractions. Moore’s LinkedIn profile places him in Dubai, where on July 5, 2022, Moore and NetCents announced a partnership with “His Highness Sheikh Mohammed Bin Maktoum Bin Juma Al Maktoum.”
Moore has yet to file annual financial statements for 2021 and 2022.
In the year ending Oct. 31, 2020, the company, after raising millions of dollars from investors, reported revenue of $271,492 and expenses of $21.7 million, including $5.1 million on consultants, $1 million on professional fees and $3.2 million in employee salaries; this also includes $9.8 million of share-based payments.
Moore reported a salary of $269,000 and $414,029 of shares in 2020.
2018, when the company cleared $120,578 in revenue, Moore reported remuneration of $311,000 cash and $997,503 worth of shares.
The company’s CFO, Christopher Cherry, resigned in July 2021.
Its frozen stock sits at 69 cents per share.