Liquid Marketplace and co-founders committed securities fraud, Ontario tribunal finds

Ontario’s Capital Markets Tribunal has found that Liquid Marketplace and its co-founders committed securities fraud in a business selling tokens tied to collectible assets, while rejecting the Ontario Securities Commission’s allegations against the company’s chief financial officer.

In Ontario Securities Commission v Liquid Marketplace Inc, 2026 ONCMT 32, dated September 30, 2026, the tribunal found that the token arrangements were securities and that purchasers had been misled about ownership, blockchain transfers and safeguards for the underlying collectibles.

The ruling determines regulatory liability, not criminal guilt. It does not set a penalty or order compensation to individual purchasers. Sanctions and costs are being addressed separately, with a later October 21 scheduling order setting the next steps.

Fractional collectibles marketed as investments

Liquid Marketplace Inc. and Liquid Marketplace Corp., referred to together in the reasons as LMP, created an online platform where users could buy and trade tokens said to represent fractional ownership of collectibles. Most of the 37 collectibles involved were physical trading cards.

The initial token sales generated approximately US$2.7 million. That figure is sales proceeds, not a fine or a tribunal assessment of total investor losses. LMP earned fees from those initial sales and subsequent trading. Its system included 481 accounts for Ontario investors.

Co-founder Ryan Bahadori was responsible for much of the business’s operations and marketing. Fellow co-founder Amin Nikdel handled its technology and shared some operational responsibilities. Dennis Domazet served as chief financial officer.

The respondents disputed the OSC’s characterization of the tokens as securities. They argued that value came from the collectibles rather than LMP’s business, and that the platform merely helped record and transfer co-ownership interests.

The tribunal instead examined the arrangement as a whole. An investment contract involves money invested with an expectation of profit in a common enterprise, where profit depends significantly on others’ efforts. Here, purchasers depended on LMP to create the tokens, maintain the trading platform and ownership records, organize sale votes and arrange authentication, appraisal, storage and insurance.

The tribunal found that this was an investment opportunity rather than simply a way to possess a collectible. The possibility of acquiring a whole asset through a buyout did not alter that conclusion. Nor did the OSC have to prove actual investor harm merely to establish that the arrangement was a security.

Promises did not match the platform’s operation

The tribunal found several fundamental gaps between what purchasers were promised and what LMP delivered. Its terms said collectors would sign listing agreements transferring ownership to token holders. In fact, only five of the 37 collectibles had listing agreements, and the use of those agreements was largely abandoned. The tribunal concluded that the tokens did not provide the promised legal fractional co-ownership.

LMP also represented that the tokens existed and could be transferred on the Ethereum blockchain. Some were never created and others were created only months after the associated collectibles were listed. Even when tokens were created, they stayed in LMP’s wallet. Purchasers’ interests were tracked through an internal ledger, and users could not move their tokens to their own wallets as represented.

Promises about the physical assets also failed scrutiny. The tribunal found that LMP did not carry out the authentication and appraisal work it advertised, entered no custody agreements with collectors and did not obtain the promised audits of the storage vaults. Insurance arrangements did not establish the comprehensive protection conveyed to purchasers.

Representations about arrangements to protect token holders if the business failed were also false. The reasons say LMP had no such structures or processes. Its platform eventually went offline without notice to purchasers, and account holders received neither communication about its status nor repayment for their holdings.

For securities fraud, deprivation can include putting someone’s economic interests at risk; a completed loss is not always necessary. Here, the tribunal found both risk and actual loss when the platform closed without compensation. It found that Bahadori knowingly made false statements about central investment attributes, and that Nikdel knew the true position and participated in conduct he knew or ought to have known was fraudulent.

Different findings for the chief financial officer

The tribunal also found that LMP traded without registration, distributed securities without a prospectus and operated a marketplace without the required regulatory status. Bahadori and Nikdel, who authorized or permitted those activities, were held responsible for those corporate breaches.

Domazet’s position was different. The OSC sought to hold him responsible as an officer who acquiesced in LMP’s wrongdoing. The tribunal accepted that acquiescence can mean quiet acceptance without protest, but held that it requires actual knowledge rather than an assumption that an officer ought to have known.

Where the evidence showed Domazet knew about aspects of the fraudulent conduct, he had raised concerns rather than silently agreed. The OSC had not established that he knew about the registration, prospectus or marketplace breaches. The tribunal therefore dismissed the allegations seeking to make him responsible for LMP’s contraventions.

That was not a finding that he had properly fulfilled every duty under corporate law, an issue that was not argued. The tribunal expressly declined to endorse his conduct.

Misleading statements and the next stage

The tribunal separately found that Nikdel gave materially misleading information to the OSC about compensation received from LMP, including indirect payments through a company. It did not make the corresponding findings against Bahadori or Domazet, emphasizing the context of the questions and answers and limits in the evidence about who prepared a written response.

The panel admitted relevant excerpts of compelled examinations in this regulatory proceeding after considering fairness objections. It did not declare all compelled testimony automatically admissible, and its ruling distinguished this proceeding from a prosecution under provincial offences legislation.

The September decision leaves the appropriate sanctions and costs against LMP, Bahadori and Nikdel for the next stage. Its securities analysis concerns this particular token-and-platform arrangement, not a blanket rule that every collectible or digital token is a security.