Investors
file complaint after 3iQCorp. didn’t provide proper notice
to shut down
crypto fund
Investors file complaint after 3iQCorp. didn’t provide proper notice to shut
down crypto fund
Clare O’Hara Wealth Management Reporter
Published 30 minutes ago
Open this photo in gallery:
Investors have complained to the Ontario Securities Commission, alleging 3iQ
fund manager Frederick Pye liquidated the holdings in the company’s Global
Cryptoasset Fund (QGCF) and moved the proceeds into cash in early October. The
doors to the Ontario Securities Commission hearing rooms in Toronto on Dec.
12, 2019. Melissa Tait/The Globe and Mail
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A group of early cryptocurrency• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта investors in Canada’s first retail bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin
investment• Экономика » Финансы » Инвестиции fund have filed a complaint with Ontario’s securities regulator,
claiming fund manager 3iQ Corp. violated oversight rules when a portfolio
manager moved the fund’s digital assets into cash just prior to a major
bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin rally this fall.
Investors have complained to the Ontario Securities Commission , alleging 3iQ
fund manager Frederick Pye liquidated the holdings in the company’s Global
Cryptoasset Fund (QGCF) and moved the proceeds into cash in early October.
Shortly afterward, on Oct. 10, the company issued a letter advising
unitholders that the crypto fund would be terminated on Nov. 11.
The letter, which The Globe and Mail has reviewed, did not inform investors
that there had already been a change in the holdings of digital assets at that
time.
The OSC said it cannot confirm or deny whether it has received complaints
relating to specific cases, or whether an investigation has been launched.
3iQ’s current president and CEO, Pascal St. Jean, wrote in the Oct. 10 fund
termination letter that investors could redeem their money any time before the
close of business• Экономика » Бизнес at 4 p.m. on Nov. 11.
“For clients who desire continued exposure to digital assets, we invite you to
look at our Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin and Ether ETFs,” he added.
However, several investors told The Globe they were not given adequate notice
– or in some cases not notified at all – to be able to move their funds into
other digital asset funds before the liquidation.
Mr. St. Jean told the Globe in an e-mail• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты that the fund was terminated as it
was “no longer economically feasible to continue the fund,” and 3iQ, acting as
the investment• Экономика » Финансы » Инвестиции manager, followed “the necessary protocols for fund closure,
including liquidating the fund’s holdings, notifying unitholders, and
consulting with legal and compliance experts” to ensure all actions were in
accordance with the fund’s declaration of trust and applicable regulations.
“Unitholders were given options to redeem their units or transfer their
assets, and the process was conducted transparently with regular communication
to stakeholders,” Mr. St. Jean said.
The Global Cryptoasset fund had more than $3.3-million in assets, as of Oct.
1, 3iQ said.
Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin prices surged about 43 per cent from the beginning of October until
mid-November, just before and after Donald Trump• Объект человек » Персоналии по алфавиту » Персоналии на Тр » Трамп, Дональд was elected U.S. president• Соединённые Штаты Америки (США) » Политика США » Политики США » Президент США
• Соединённые Штаты Америки (США) » Государственное устройство США » Президент США
• Политика » Политика США » Политики США » Президент США
• Государство » Государственное устройство США » Президент США,
and investors say they missed out on a period of major gains.
Toronto-based 3iQ made headlines in 2019 after it won a three-year battle with
the OSC to launch the country’s first bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin fund for retail investors.
Garrett Atkinson was one of QGCF’s first investors and held three separate
accounts with 3iQ with approximately $20,000 invested in total. He says he
never received the letter from 3iQ that was e-mailed on or around Oct. 10
because it was sent to an old e-mail address• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты on file, even though he updated
his e-mail address• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты with the portfolio manager in 2022.
When Mr. Atkinson heard about the fund termination from another account
holder, he reached out to 3iQ on Oct. 24 to request his money be redeemed from
QGCF. He asked 3iQ to move 75 per cent of his funds into the 3iQ Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin ETF
BTCQ-T , and the remaining 25 per cent in 3iQ’s Ether Staking ETF ETHQ-T .
Executive assistant Kristin Small responded to Mr. Atkinson in an e-mail• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты on
Oct. 29, saying the company “was looking at the next steps” in moving his
money and advised him to wait until 3iQ released a formal statement in early
November that would explain the “process and options” on transferring funds.
“I would ask that you wait until you receive this notice before we begin the
transfer process,” Ms. Small said in the e-mail• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты.
Mr. Atkinson repeated the investment• Экономика » Финансы » Инвестиции directions on Oct. 29, Nov. 6 and Nov.
13, stating that he did not want to lose his exposure to bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin or ether
during the QGCF termination process.
Mr. Atkinson said neither Ms. Small, nor any other employee of 3iQ, provided
any correspondence during that period that revealed that QGCF had already
moved out of digital assets and was holding only cash.
On Nov. 6, Ms. Small wrote that his request had been sent to the company’s
portfolio manager, and “there are a few moving parts but I believe your
request will be honoured.”
The trade was finally executed on Nov. 19 – almost four weeks after the
initial trade instructions. It was reported to Mr. Atkinson on Nov. 27 – a
delay that he says cost him nearly 50 per cent in returns.
“Prior to the fund being terminated, the company website continued to show an
investment• Экономика » Финансы » Инвестиции in digital assets. So, while I was frustrated at the length of time
my transfer was taking, I felt that, at the very least, l was still exposed to
bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin,” Mr. Atkinson said in an interview.
Until Nov. 11, the company’s website showed QGCF’s portfolio allocation in
digital coins to be 61 per cent in bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin, 15 per cent in ether, 12 per cent
in solana, 5 per cent in stacks, 3 per cent in maker and 3 per cent in
blockchain• Информационные технологии » Информационно-коммуникационные технологии » Информационные технологии и телекоммуникации » Базы данных » Публичная база транзакций » Блокчейн
• Высокие технологии » Информационные технологии и телекоммуникации » Базы данных » Публичная база транзакций » Блокчейн provider NEAR Protocol.
However, Bloomberg fund data shows that as of Oct. 7, the net asset value of
QGCF became disconnected from the performance of bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin, which began to rise
in the following weeks. Meanwhile, QGCF remained stagnant at around $42 per
unit until its termination date on Nov. 11.
Between Oct. 24 and Nov. 19, bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin rose about 39 per cent, while ether rose
by 28 per cent.
As a result, Mr. Atkinson calculates that he missed about a 50-per-cent
return, including over the several weeks it took the fund manager to transfer
his funds into other digital assets and he remained unexposed to crypto.
Between Oct. 7 to Oct. 29, when he confirmed trade instructions to 3iQ, his
lost returns were about 4.77 per cent. From Oct. 29 until Nov. 19 – the date
3iQ completed the transfer into other ETFs – he calculates that he lost
another 45.43 per cent in returns.
Howard Atkinson, Garrett’s father and former chair of 3iQ, was an early
investor• Экономика » Финансы » Инвестиции » Инвестор of QGCF and had five family members open 14 accounts at 3iQ in March,
2017. Mr. Pye was the listed portfolio manager and investment• Экономика » Финансы » Инвестиции adviser for each
family member.
Howard Atkinson alleges the company and Mr. Pye failed to update client
accounts and failed to follow the stated investment• Экономика » Финансы » Инвестиции objectives listed in the
fund’s offering memorandum – a regulatory document provided to investors on
account opening and offered on the company’s website.
3iQ said in the offering memorandum that to “achieve its investment• Экономика » Финансы » Инвестиции objective,
the fund invests substantially all of its net assets in long-term holdings of
leading digital assets.” The document says the manager will provide “at least
30 days prior notice of such termination to unitholders.” Upon such a
termination, the fund will “liquidate the portfolio” and distribute the
proceeds to unitholders.
“None of our family members were ever contacted by Mr. Pye or 3iQ to update
know-your-client forms, review investment• Экономика » Финансы » Инвестиции objectives or obtain the most recent
client contact,” Howard Atkinson said in his formal complaint to the OSC on
Dec. 9.
Mr. Atkinson said that, as of early October, three family members still had
exposure to QGCF across eight different accounts, but none of them had
received a fund termination notice from 3iQ within 30 days prior to
termination. During that time, he said, the fund manager did not wait until
termination to liquidate the fund but, rather, liquidated more than 30 days
prior to the termination date.
“The failure to properly communicate and enact trade instructions cost clients
tens of thousands of dollars,” he added.
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