Calgary crypto trader's CFO took $14M from clients, alleges Alberta Securities Commission
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CatalX CTS Ltd., which operated as Catalyx, was forced to cease operations in late 2023 after the company was hacked, and customer assets were stolen.
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On Thursday, the Commission outlined allegations of misconduct and fraud surrounding the company's chief financial officer, Jae Ho Lee, and misconduct against CEO Hyuek Jae Park.
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The Commission said, 'Lee perpetrated a fraud on Catalyx clients, and that Catalyx failed to comply with a written undertaking it had given the ASC to permit it to continue operating in Canada.'
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Catalyx's application for registration as an authorized crypto asset trading platform was being reviewed, the Commission noted in a notice of hearing.
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It is alleged that in 2019, Lee 'improperly withdrew' over $14 million worth of clients' crypto assets from the Catalyx platform, then transferred them to other cryptocurrency accounts he controlled elsewhere.
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Lee then returned some of the assets to the Catalyx platform, leaving a 'substantial' shortfall, according to the Commission.
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'Lee also misappropriated clients' fiat currency deposits for unauthorized purposes,' read a release from the Commission.
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By Nov. 24, 2023, Park was aware that Lee perpetrated a fraud on clients, but the company failed to inform the commission of the breach until nearly a month later, on Dec. 21.
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'In further breach of the written undertaking, Catalyx failed to establish, maintain and apply policies and procedures to manage and mitigate the risk of an employee misappropriating clients' fiat currency and crypto assets that were meant to be held in trust for clients,' alleges the Commission.
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An appearance to set a date for a hearing will be held in Calgary this September.
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In a sworn affidavit, Park said CatalX determined it was not feasible for it to continue to operate its platform 'without the required technological and liquidity support from Bittrex Global,' one of the company's major shareholders.
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