B.C. regulator reaches million-dollar settlement over alleged crypto fraud

The former director of a now-defunct cryptocurrency trading platform, which was accused of fraud by the British Columbia Securities Commission, has agreed to pay the regulator $1 million to settle the case.

The commission says the million-dollar settlement charge is the maximum possible levy for such instances of alleged misconduct.

Michael Ongun Gokturk was the sole director and “public face” of three since-dissolved companies that operated a crypto trading platform that was advertised as a safe and secure way to buy, sell and store cryptocurrencies, the B.C. Securities Commission said in a statement Monday.

The companies—Einstein Capital Partners Ltd., Einstein Exchange Inc., and Einstein Law Corporation—were accused by the regulator of using customer deposits to fund the platform’s operations and pay out other customers’ withdrawals.

The conduct, which occurred between September 2017 and November 2019, amounted to fraud “because those uses of customers’ assets were not the ‘safe and secure method to buy, sell and store cryptocurrency on the platform’ that was promised to them,” the regulator said.

As director of the three companies that operated the platform, Gokturk was found to have “directed, authorized, or acquiesced in their misconduct,” according to a settlement agreement reached by Gokturk and the regulator.

‘A Ponzi scheme’

The agreement was reached more than two years after the BCSC accused Gokturk and the Einstein companies of fraud in their cryptocurrency operations.

“Gokturk and the Einstein entities operated the platform as a Ponzi scheme by continuing to accept deposits and paying out some customers with money and crypto assets drawn from the pooled bank accounts and wallets,” the regulator said in a February 2024 statement levying the allegation of misconduct.

At their peak in January 2018, the Einstein companies held more than US$34 million in cash and crypto assets on behalf of their customers, the BCSC says.

By 2019, when the B.C. Supreme Court appointed a receiver to preserve and protect the companies’ remaining assets, they held less than US$45,000 in assets and owed their customers more than US$18 million, according to the settlement agreement.

The Einstein companies were incorporated in B.C. in 2017 and were dissolved in 2020 with no remaining assets.

According to the settlement, Gokturk used approximately $1 million of his own money to fund the platform and return lost funds to some users, which the BCSC’s executive director highlighted as a mitigating factor in the case.

In addition to the $1 million that Gokturk agreed to pay to settle the matter, he was also permanently banned from participating in B.C.’s investment market, including as an officer, director, promoter or consultant.

He was also prohibited from trading securities or derivatives outside of his personal accounts.

The B.C. resident had been registered as an investment advisor from 2002 to 2003 and as a salesperson from 2003 to 2006, according to the commission.

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