The fintech Montreal-based Timechain and three of its executives are the subject of an investigation and blocking orders from the Autorité des marchés financiers (AMF).
Posted at 7:00 a.m.
The AMF has reason to believe that Timechain, its founder and controlling shareholder Louis Cléroux, as well as Jérémie Picard and Mathieu Cocher – respectively chief operating officer and head of trading at Timechain – made investments without an AMF prospectus, that they did not respect their commitments to the AMF and that they gave false information in response to questions from investigators.
At least 12 investors who have invested sums totaling nearly 6 million are involved in this affair. The AMF believes that the millions were withdrawn from bank accounts or cryptocurrency accounts identified by Timechain management.
The gendarme also suspects that part of the investors’ money was used to pay personal expenses of Louis Cléroux and operational costs of Timechain rather than being used in the fund of cryptotrading operated by Timechain, as represented to investors.
Contacted by The PressLouis Cléroux explains that the investors in question are holders of convertible debt.
“I don’t see why I would have needed prospectuses for convertible notes to accredited investors,” he said, adding that three of the investors are also “very close” friends who have released “small amounts”. “They were 100% reimbursed,” he said.
” The start-up, that’s how we finance ourselves. It’s very common. Half of the investors have already been reimbursed. I am in daily contact with affected investors,” he says.
One of the investors would have provided the majority of the approximately 6 million and Louis Cléroux claims to be on “good terms” with him. “He understands what happened with Luna,” said Louis Cléroux, referring to the collapse this spring of the value of this token in which Timechain had invested.
Lost everything in LUNA
The original LUNA token, recently renamed LUNC, is trading today for a fraction of what it was worth just a month ago. In a letter submitted on May 18 to the AMF by Louis Cléroux, Timechain and their lawyers, it is to this collapse that they attribute the loss of some 4 million US dollars which has caused the company to sink.
According to a summary of the letter produced by the AMF in its application to the Financial Markets Administrative Tribunal, Timechain’s Binance (cryptocurrency exchange) account contained the equivalent of 4 million US dollars at the beginning of the previous week ( i.e. between May 8 and May 10).
Also according to the lawyers letter, on May 11 and 13, Luna and (its parallel “stable” token) UST suffered a severe drop and lost almost all of their market value. “A “stop-loss” mechanism would have been put in place and would have failed since it would not be triggered when it should have been due to an incident attributable to Binance. The Binance account of Timechain has thus lost more than 95% of its market value”, it is specified.
However, AMF investigators point out in a court document that the information obtained by Binance contradicts all of the assertions contained in the letter from the lawyers of Louis Cléroux and Timechain.
Binance’s Timechain account had been completely emptied prior to the severe drop in UST and Luna tokens and the alleged technical incident related to the alleged stop-loss mechanism, so the account balance was the equivalent of 392,000 US$, as it appears from the transaction record sent by Binance dated May 16 and not US 4 million.
Excerpt from the survey summary
Called by The Press to reply to these remarks, Louis Cléroux replies that these are not the data he has in his possession. “I am currently carrying out an internal investigation to verify the information. So I can’t comment further,” he said.
The investigators also claim that Timechain and Louis Cléroux “provided investors with false and misleading information about a corporate action in order to encourage them to invest with confidence”.
The investigation established that Louis Cléroux regularly transferred amounts from Timechain’s corporate bank account to his personal bank account and that he paid a number of personal expenses directly from the company’s account. “Between the 1er and on May 16, Louis Cléroux made 42 transactions to his personal account for a total of $217,296, from which it is possible to deduct $12,240 which could have been used to reimburse a supplier. »
It is added that Louis Cléroux made numerous payments from his personal Visa credit card, in particular the payment of the expenses of a trip to Mexico of more than two months with his wife and their child at the beginning of the year.
“Louis Cléroux also paid the down payment of a penthouse for a total of $251,900 from the account in which the investors’ money is deposited, as well as interest, taxes and other fees related to this penthouse for a total of $87,071. “.
“The way it’s shot”
Louis Cléroux says he paid himself a dividend of $200,000 last year, which he used to pay for his penthouse. ” That [l’AMF] said is not wrong. It’s the way it’s turned out that makes me look like a cheat. »
Louis Cléroux explains to The Press that he had two suppliers, one in India and the other in Bangladesh. “I made several payments to them from transfers from my personal account. He adds that his personal credit card is the company card. “We had no other credit cards. Until last January, my personal credit card absorbed all business expenses. And I made regular transfers to my card. »
Founded in 2019, Timechain presented itself until recently as an alternative to traditional banking services by being a decentralized financial services company specializing in investing in digital assets.
The company had launched last fall an application allowing in particular the transfer of funds and the management of a portfolio of cryptocurrencies.
Louis Cléroux indicates that due to the AMF investigation, Timechain had recently adjusted its activities towards “consulting blockchain services to avoid problems in the future”.
Timechain generated its income by carrying out financial transactions with a good part of its cash, that is, with the money coming from investors. “Part of the money was used to pay for operations and another portion to carry out transactions,” says Louis Cléroux.
But with the storm that’s just hit Timechain since Luna fell, he says, “we laid everyone off in mid-May. We lost everything. The big crash. Nothing is happening anymore”.
Timechain generated revenues of 16 million in revenue in 2021 and posted net profits of 1.5 million, says Louis Cléroux.
The AMF investigation is continuing. No charges have yet been laid.
With the collaboration of Hugo Joncas, The Press