Executive Summary: Key Legal and Evidentiary Issues

• Fraud count: appellate court sets aside the acquittal and enters a conviction under s. 126.1(1)(b) of the Securities Act; sentencing remanded.

• Deprivation element clarified: reliance by specific investors was not required; the misrepresentations about Peblik’s interest in the Thierry Mine created a material risk to investors’ economic interests.

• Misleading-statement count: appeal dismissed because the charge particularized an affirmative misstatement, not an omission; omission theory could not ground a conviction as charged.

• Unregistered trading count: appeal dismissed; on the “business purpose” test, fundraising activity was incidental rather than a core trading business, and the trial judge’s findings were open on the evidence.

• Key factual findings upheld: no Cadillac consent to assign the earn-in option to Peblik; Peblik’s website/white paper falsely claimed direct control/asset-backing from the Thierry Mine.

• Investor monies: 32 investors purchased notes totaling about $485,000 (trial judge also quantified outsider investments at $448,515.50); all investments were lost, but actual loss was not required to prove fraud.

Facts of the case

Thierry Mine, a long-inactive copper asset in northern Ontario, was owned in 2018 by Cadillac Ventures Inc. An earn-in option gave Northern Fox Resources Inc. the right to acquire 70% by raising and spending roughly US$13.9 million within specified timelines. Northern Fox, led by Mr. Katmarian, failed to raise funds traditionally and pivoted to cryptocurrency. Without Cadillac’s consent (required under the earn-in agreement), Northern Fox purported to assign its earn-in to Peblik Inc., which then marketed a token said to be “asset-backed” by the mine. The court affirmed findings that Cadillac never consented, that Mr. Katmarian knew consent was required and lacking, and that Peblik’s materials (website, white paper, investor decks) falsely asserted direct control or an interest in the mine.

Investors acquired convertible notes intended to become Peblik tokens. The trial judge found 32 investors and described total investments with two figures in the record: “about $485,000” and $448,515.50; in any event, the investments were lost. The trial judge acquitted Mr. Katmarian on all counts after a 16-day trial in 2023.

Issues on appeal

The prosecution appealed three acquittals: (1) fraud under s. 126.1(1)(b); (2) making a materially misleading statement to the regulator under s. 122(1)(a); and (3) engaging in the business of trading without registration under s. 25(1), contrary to s. 122(1)(c). The appeal turned on whether the trial judge misapplied the law on causation/deprivation for fraud, failed to consider an omission-based pathway for the misleading-statement offence, and erred in applying the “business purpose” test to trading activity.

Appellate analysis and holdings

On fraud, the appellate court held that the trial judge applied too narrow a view of deprivation by effectively demanding investor-by-investor proof of detrimental reliance at the time of investment. Citing governing authorities, the court emphasized that deprivation includes placing pecuniary interests at risk and does not invariably require proof of inducement or reliance. The misrepresentation that Peblik had a valid mine interest was material and went to the core value proposition (that the token was “asset-backed”); that dishonesty created a sufficient causal link to the risk of deprivation for all investors. The court therefore set aside the acquittal and entered a conviction on Count 1.

On the misleading-statement count, the Commission’s theory on appeal leaned on omissions. But the information as sworn charged an affirmative misstatement, not an omission. Given the penal context and the need to prove the offence as particularized, the court found no reversible error in the trial judge’s approach and dismissed the appeal on Count 2.

On unregistered trading, the trial judge’s application of the “business purpose” test was supported by the record: no commissions, infrequent trading, no profit from selling securities, and evidence that Peblik’s principal activities focused on building a blockchain protocol rather than running a trading business. Those findings were open on the evidence and attracted deference; the appeal on Count 3 was dismissed.

Outcome

The appeal succeeded in part. The court entered a conviction for fraud (Count 1) and remanded the matter for sentencing. The appeals on the misleading-statement (Count 2) and unregistered-trading (Count 3) acquittals were dismissed.