Toronto cryptocurrency exchange Coinsquare faces three separate lawsuits from former C-suite executives, having recently settled a fourth suit with a former employee who alleged he was fired after repeatedly asking the company to stop its attempts to manipulate the market.

Coinsquare admitted in a July settlement with the Ontario Securities Commission that it misled the market with wash or fake trading and retaliated against an internal whistleblower. The company’s CEO and president have resigned as a result.

One of the outstanding lawsuits alleges a similar situation. Coinsquare’s former chief digital and growth officer claims he was fired after he shared with top executives his concerns about the company’s regulatory compliance.

“The complaints that Thomas has are similar—although not exactly the same—as the complaints under which there was a settlement with the OSC,” said Andrew Monkhouse, who is representing the plaintiff, Thomas Jankowski.

Coinsquare—which in court documents denied the allegations—said in a statement emailed to The Logic it could only provide information contained within the filings for matters before the court.

In July, the securities commission announced a settlement with Coinsquare, then-CEO Cole Diamond, president Virgile Rostand and chief compliance officer Felix Mazer for market manipulation and reprisal against an internal whistleblower.

Between July 2018 and December 2019, Coinsquare reported fake or wash trades that made up more than 90 per cent of reported trading volume on its platform under the direction of Diamond, according to the settlement, misleading clients and the public, and contravening the Ontario Securities Act.

The company also admitted to retaliating against an internal whistleblower who spoke out repeatedly against these practices, the settlement reads.

The settlement included Diamond’s and Rostand’s resignations and their payment of a total $1.9 million in penalties, among other measures. The OSC also required that Coinsquare create an internal whistleblower program.

Jankowski, who served as the company’s chief digital and growth officer from mid-July 2018 to mid-April 2019, “is concerned that his termination may have stemmed from ongoing discussions and concerns he brought forward regarding the company’s securities, compliance and potential violations,” according to a statement of claim filed in the Ontario Superior Court of Justice in May 2019. The former executive is seeking $600,000 in damages, as well as a percentage of revenue the company earned and other compensation.

Coinsquare failed to report “a number of leaks” to government bodies that Jankowski believes should have been reported, reads the filing. The CEO and CPO at the time “dismissed” his concerns, the documents read. “It was clear that the company did not want Federal agencies involved within the issues that were occurring.”

Monkhouse said Jankowski’s concerns include those contained in the OSC settlement, as well as broader issues. He declined to elaborate further.

In a statement of defence filed with the court, Coinsquare denied Jankowski’s allegations, claiming he could not meet the terms of his role, including a troubled European expansion. The company claimed he also “exhibited unacceptable conduct and attitude.” That allegedly included falsifying an incident about a staff member attempting to collude with him to have another fired.

Coinsquare also filed a counterclaim seeking to order Jankowski to deliver and delete any confidential company information he may still possess, among other things. He countered their claims in a subsequent filing that says the European expansion was not a mandated part of his role; he also denied falsifying the alleged collusion, saying he was fired “the morning before he was given an opportunity to provide evidence regarding the collusion.”

The case is currently in a preliminary stage, said Monkhouse. None of the allegations have been proven in court.

Jankowski’s allegations of reprisal are similar to a recently settled lawsuit launched by another former employee, Matthew Nowak. Nowak worked for Coinsquare as director of automated trading strategies starting November 2018 and was fired in December 2019. 

He alleged in his statement of claim that after he started working there, he learned the company was wash trading under the then-CEO’s direction. He claimed he opposed the practice and spoke against it to several higher-ups. Nowak said he eventually asked several executives, including the CEO at the time, in an email for him and his team to “be left out of any and all discussions involving wash trading. We are deeply uncomfortable with it and do not wish to be associated in any way shape or form,” according to court documents. Less than two months later, he received an email with a termination letter.

Nowak’s lawsuit sought $1.5 million in damages. It was settled out of court, Nowak’s lawyer Ryan Keeney said in an email to The Logic.

He did not comment further. Coinsquare’s lawyer said he does not publicly discuss cases with which he was involved.

A former employee, who wasn’t aware of Jankowski reporting the activity, told The Logic they also brought concerns to executives, who told them to “stay in your lane.”

The person —who is not one of the former executives suing Coinsquare, and whom The Logic agreed not to name because they wanted to distance themselves from the company—said they felt the whistleblower in the OSC case faced greater reprisal because they were more vocal about the situation. The former employee said they worried about losing their job if they continued to vocalize concerns after being frozen out of meetings relevant to their job after first bringing up issues.

The other outstanding lawsuits, from Coinsquare’s former CFO and COO, allege the men are entitled to damages after Coinsquare failed to compensate them according to their share-option plans.  The company denies the allegation.

Former COO Robert Mueller alleged he was wrongfully dismissed and asked for damages for lost salary and benefits, as well as the opportunity to earn a bonus. He is also seeking nearly $1.3 million for what he called failure to pay out his share-option plan or an alternative remedy, according to his statement of claim. Former CFO Ken Tsang made similar claims, including a stock-option-related one for nearly $900,000, according to his statement of claim.

Coinsquare claimed in its statements of defence that neither man is entitled to the claims they are making regarding their options.

The company also claimed that both men were let go after the value of cryptocurrencies “was devastated” in early 2018, and the company indefinitely suspended plans for an initial public offering and suffered heavy losses that prompted it to lay off about 30 per cent of its employees, including Mueller and Tsang on Jan. 31, 2019.

It claimed Tsang’s salary from his current job as CFO of Capital One Bank Canada should offset any potential damages, and alleged he created an “extremely unrealistic” financial forecast, resulting in a loss for the company. It alleged Mueller allowed a project to jump roughly $420,000 over budget. It said both men would have seen their potential bonuses reduced or eliminated because of these alleged actions, had they not been terminated.

“These are routine matters of employment law. When senior employees transition out of a company, negotiations regarding severance are common,” the company said in a statement to The Logic.

With files from Zane Schwartz