OSC investigation concludes that Toronto defrauded people of $1.6 million
A Toronto man defrauded investors of $1.6 million to, in part, fund bets on horses at Woodbine Racetrack, an Ontario Securities Commission investigation concluded.
Dennis Meharchand, the principal and man behind Valt.X Holdings, secured the investment from people in Canada and US through loans, convertible notes or to participate in a licensing programme known as “Crowdbuy”. Valt.X Holdings purports to develop, produce and sell cybersecurity hardware.
The OSC found that Meharchand illegally distributed securities and traded without being registered. While investors contributed $1.6 million from January 2012 to December 2016, investigators found the company had sales of less than $15,000 during this period.
The respondent used more than 10 different bank accounts at four different banks during this four-year spell, with more than $600,000 being transferred between them during this time.
The OSC found he regularly commingled his own personal funds and company funds, with no accounting done. Meharchand admitted the state of his affairs was akin to a “shoe box” of invoices and information.
Cash from these accounts was used for: placing bets on horses at Woodbine Racetrack; paying “black hat hackers”, a team he said were doing development work for Valt.X Technologies; repayment of short-term loans; and payments to noteholders and consultants.
With regards to the betting on horses, Meharchand also used an online account in the name of Valt.X Holdings to fund off-track betting at Woodbine Racetrack. During the period in question, this account received more than $450,000, at least $380,000 of which were transferred from the aforementioned accounts, and showed a loss of more than $275,000.
The OSC findings cast also doubt on the respondent as a reliable witness, citing missed deadlines and vagueness around medical reasons for failing to meet them. The investigation also highlighted how he changed his version of what happened to investors’ money, with one explanation that “wise guys” came to his house asking for cash and threatening violence as “inherently fanciful, illogical and unworthy of belief”.
His version of the fate of the "CrowdBuy" scheme, where participants could purchase Valt.X software licenses at a discount and earn returns through their resale, was also deemed inconsistent.
The OSC’s said its skepticism about the respondent’s evidence was compounded by his “apparent disregard for the serious obligation to be truthful when testifying under oath”.
A sanctions and costs hearing is scheduled to take place no later than November 9, 2018.
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