Accused of running afoul of Saskatchewan's securities laws, an upstart Bitcoin company responded Wednesday with a few allegations of its own, arguing regulators are engaging in "speculative fiction" and going after "thought crimes." Punctuated by tense exchanges, objections and sighs of frustration, a longawaited securities hearing for Dominion Bitcoin Mining Company Ltd. and three company officials - Jason Dearborn, Peter Voldeng, and Jim Gibbon - got underway in Regina before a threemember hearing panel. Dubbed "cryptocurrency," Bitcoin is essentially digital money, allowing for electronic financial transactions without using a banking system.
Governments are struggling worldwide with how to regulate the virtual currency and the "miners" who manage and authenticate the transactions digitally. But Dallas Smith, the lawyer for the Financial and Consumer Affairs Authority (FCAA), contended it's something far more straightforward that got Dominion Bitcoin in trouble.
It's alleged the company publicly advertised or solicited sales of securities on its website without following the Securities Act, including not registering to conduct such activity, not filing a prospectus, and making misleading statements.
But Dearborn, a former MLA who gave an opening address on behalf of the corporate entity, called the allegations "spurious" and maintained no shareholders were ever solicited. "The case lacks credibility," he charged.
Cloudesley Rook-Hobbs, the lawyer representing Dearborn alone, accused FCAA staff of trying to regulate "thought crimes" by speculating on events that might occur. The respondents contend the securities investigator had essentially peeked at "a chalkboard in a locked room" - "picking the lock" on an encrypted website that wasn't publicly accessible and glancing at a draft idea.
But FCAA investigator Harvey White testified: "I only had access to what was publicly available." When he went on the website in April 2014, there were a couple of pages that required a log-in, but most were publicly accessible, in particular the links that caused him concern, he said.
For example, on a page titled "Mining 'the new frontier,'" the website stated, "if you are a sophisticated investor, please feel free to peruse the rest of the site. Learn about bitcoins and learn how to share in the proceeds."
Other pages referred to a list of 10 provincial corporations that contract with Dominion; stated that "by taking part in our offering, you own a share in one of the ten provincial companies;" said "shareholders may take part in any growth," and referenced "investment" and "assetts (sic)."
White said when concerns about the site went unaddressed, the FCAA issued a cease-trade order on May 1, 2014. He subsequently interviewed each of the three shareholders.
In a recording of a May 12, 2014 interview played at the hearing, Voldeng told White, "We haven't yet taken anyone's money to do anything."
Accompanied by a lawyer for that interview, Voldeng, an engineer by training and the president of Dominion Bitcoin, said the company had no interest at that point in raising share capital. "It is an operational company, not for investment," he told White. He questioned why the investigator was pushing for changes to the website before it went "live," but promised to do his best to get it changed as necessary.
The respondents challenged the admissibility of much of the evidence heard Wednesday, and took issue with the hearing even proceeding.
"Every piece of evidence should be thrown out here," interjected Gibbon. The Edmonton resident, who is not represented by a lawyer and participated by phone, contended all of the evidence was obtained illegally.
Half of Wednesday's hearing was devoted to wrangling over preliminary motions and procedural issues, including disclosure of documents, a secret informant, whether or not a proper witness list had been provided, and constitutional challenges.
But the three-member panel - chair Mary Ann McFadyen and retired Queen's Bench Justices Eugene Scheibel and Larry Kyle - reiterated several times that they will reserve their decision on those issues and pressed to hear the evidence.
"We're going to hear everything. This case has been going on and on for months and months," said Scheibel.