Executive Summary: Key Legal and Evidentiary Issues

• Stephan Katmarian was convicted of fraud under s. 126.1 of the Securities Act for promoting Peblik tokens as asset-backed when the underlying ownership interest in Thierry Mine had never been validly assigned to Peblik.
• Central to the fraud was the absence of Cadillac Ventures' written consent to the assignment of the Earn-In Agreement from Northern Fox to Peblik, a consent the agreement expressly required.
• Thirty-two investors placed $448,515.50 into notes converted to Peblik tokens based on marketing materials that contained a material misrepresentation about the mine ownership.
• Restitution was declined because the court found the prosecution had not established that the fraud caused, or significantly contributed to, the investors' losses.
• Sentencing turned on whether the fraud was a deliberate scam or fraud committed in the course of a genuine, though failed, business venture — the court found the latter.
• General deterrence was identified as the paramount sentencing objective for regulatory offences under the Securities Act.

Facts of the case

Stephan Katmarian is an experienced mining promoter who, in 2016, approached Norman Brewster — President and CEO of Cadillac Ventures Inc. ("Cadillac") — with a plan to redevelop the Thierry Mine, a copper mine in Northern Ontario that had not operated since 1981. Katmarian believed that growing demand for lithium-ion batteries, which require copper, would make the mine's redevelopment commercially viable. Cadillac and Katmarian's company, Northern Fox Resources Inc. ("Northern Fox"), signed an Earn-In Agreement on July 19, 2016. Under that agreement, Northern Fox was required to raise US$13.9 million and complete a series of tasks — including the preparation of a National Instrument 43-101 geological report — within a defined period, upon completion of which it would acquire a 70% interest in the mine.

When conventional fundraising through an IPO proved unfeasible, Katmarian turned to cryptocurrency. Peblik Inc. ("Peblik"), a company incorporated in 2015 that was developing token technology, became the vehicle for fundraising. Katmarian became a director of Peblik in 2016. On August 1, 2017, Northern Fox and Peblik signed an Assignment Agreement under which Peblik would acquire 51% of the mine, Northern Fox would retain 19%, and Cadillac would keep its 30% interest. However, Cadillac was not a party to that agreement, and Mr. Brewster testified he had not consented to the assignment. Under the Earn-In Agreement, Cadillac's written consent was required for any assignment by Northern Fox — and no such written consent was ever obtained. The trial judge found as a fact that the Assignment Agreement did not give Peblik a valid ownership interest in Thierry Mine.

Despite this, Peblik's marketing materials — including its White Paper v.9.8, which Katmarian co-authored — represented to investors that the Peblik token was "asset backed" and that Peblik had "direct control via earn in option of an advanced-stage USD$4.8 billion mineral deposit in Canada." Katmarian's biography in that same White Paper highlighted his senior-level experience in finance, technology, and mining, and his prior positions at Desjardins Securities, C.M. Olivery and Co., and Hodgson Robertson Laing. The trial judge found that 32 investors invested $448,515.50 in notes converted to Peblik tokens on the basis of these representations.

Contractual provisions at issue

Two key contractual instruments were central to the case. The first was the Earn-In Agreement between Northern Fox and Cadillac, dated July 19, 2016, which required Northern Fox to raise US$13.9 million and complete specified work — including a 43-101 Report — before acquiring a 70% interest in the mine. Critically, the agreement required Cadillac's written consent to any assignment by Northern Fox. The second was the Assignment Agreement dated August 1, 2017, between Northern Fox and Peblik, which purported to transfer 51% of the mine interest to Peblik. Because Cadillac's consent was absent, this assignment was invalid, meaning Peblik never acquired the ownership interest it represented to investors it held.

Court's reasoning and analysis

This decision constitutes the sentencing reasons following a substituted conviction on Count 1 (fraud contrary to s. 126.1, read with s. 122(1)(c) of the Securities Act) entered by Goldstein J. on appeal in Ontario Securities Commission v. Katmarian, 2025 ONSC 4356. The trial judge, Justice Beverly Brown, had acquitted Katmarian on all four counts (2024 ONCJ 151), but Goldstein J. found that the trial judge had made findings of fact sufficient to ground a conviction on Count 1 while erring in law by acquitting, and substituted a conviction.

On sentencing, the court's primary analytical task was characterizing the nature of the fraud. The OSC urged a sentence of two years in jail, two years' probation, and restitution of $729,318.10, framing the fraud as serious, large-scale, and complex. The defence sought a suspended sentence or, in the alternative, an intermittent sentence, emphasizing that Katmarian derived no personal benefit, did not misappropriate funds, and genuinely believed he was developing a real asset. The court declined to categorize the conduct as a "scam" — defined as a scheme designed from the outset to part victims from their money for the offender's personal enrichment, with no legitimate underlying business. The evidence indicated that Katmarian's actual intent was to develop Thierry Mine, and that the fraudulent misrepresentation was a shortcut taken in pursuit of that legitimate purpose rather than a mechanism for personal enrichment. The court noted that Katmarian received just over $79,000 from Peblik, which the trial judge accepted were reimbursements for expenses rather than personal profit.

On the restitution question, the court found that the OSC had not established the required causal link between the misrepresentation and the investors' losses. Relying on principles from R. v. Drabinsky and R. v. Eizenga, 2011 ONCA 113, the court noted that Peblik's failure appeared to stem from an inability to raise sufficient funds to develop the mine — not from the fraudulent misrepresentation itself. No evidence showed that OSC intervention contributed to Peblik's collapse; the company ran out of operating funds by end of 2018, well before the OSC's quasi-criminal investigation letter was sent on November 27, 2020 (notably, after the Earn-In Agreement was terminated on September 30, 2020). Section 122.1 of the Securities Act authorizes restitution to an "aggrieved person," but the court held that a restitution order must still be tethered to a pecuniary loss the offender had a hand in creating — a causal connection that was not established here.

The court also considered several victim impact statements. Chris Balsingh lost $22,000.00; Michael Massa lost $5,000.00; the parents of Akillan Shanmugarajah lost $15,000.00; and Erin Taylor reported a loss of $56,000.00. The court gave limited weight to Mr. Balsingh's statement, as he had invested solely on the oral representations of Wadim Osa without reading any of the subscription or marketing documents. The court gave limited weight to Ms. Taylor's statement, as the trial judge had found her credibility "questionable," noted her involvement as compliance advisor, and inferred she had been aware of the misrepresentation and had sought her money back before approaching the OSC. The court further noted that Ms. Taylor received $11,500.00 from Peblik — more than Katmarian himself received.

On aggravating factors, the court noted Katmarian's status as a highly experienced financial professional who held himself out as such in Peblik's promotional materials, and his prior 2006 IDA disciplinary finding — which resulted in a 15-year registration ban and approximately $430,000 in fines, disgorgement, and costs — though that finding involved negligence rather than fraud or deceit. On mitigating factors, the court received letters of support from Norman Brewster, Michael Anthony Paul, and Christopher Graham Pay, all of whom attested to Katmarian's character and described the offence as out of character, though the court gave those letters limited weight given the authors' own involvement in the Peblik venture.

Ruling and overall outcome

The court sentenced Stephan Katmarian to six months in custody and 18 months of probation. The probation terms prohibit him from discussing, soliciting, or advising on the buying, selling, or trading of securities, derivatives, or cryptocurrencies; from employment involving authority over another person's money or property; and from acting as a director or officer of any corporation without notifying both his probation officer and the Director of the OSC's Enforcement Branch. The restitution order sought by the OSC in the amount of $729,318.10 was declined. No monetary award, damages, or costs were ordered in favor of either party; accordingly, the total monetary order is $0. The Ontario Securities Commission, as the prosecuting party, was the successful party in securing the conviction and custodial sentence, though its sentencing and restitution submissions were substantially reduced by the court.