Crypto companies say inaccurate claim of Competition Bureau approval for merger was a ‘miscommunication’

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Three companies completing a merger to create the country’s largest crypto trading platform say they were mistaken when they told investors their deal had been approved by Canada’s Competition Bureau.

WonderFi Technologies Inc., CoinSmart Financial Inc. and Coinsquare Ltd. said in news releases, media interviews and statements to investors on July 10 that a deal to combine their cryptocurrency operations had received official approval from the bureau, which regulates mergers and acquisitions. The companies even referenced the assent as they rang the opening bell on the Toronto Stock Exchange that day to mark the closing of their transaction, which had been months in the making.

But after the news was reported, the Competition Bureau’s senior spokesperson, John Power, contacted The Globe and Mail to say the government body did not review the deal or approve it. The fact that the crypto companies had suggested otherwise “concerned” the bureau, Mr. Power said.

Now, the companies say they never actually sought approval for their merger agreement to begin with.

“It was simply a miscommunication,” said Dean Skurka, chief executive officer of Vancouver-based WonderFi, which controls all three crypto companies and is backed by Shark Tank star Kevin O’Leary.

“The confusion in our messaging was that there was no official objection from the Competition Bureau to prevent this deal from closing, so we communicated this as an approval,” Mr. Skurka added. He said the transaction was “too small to require notification to the bureau.”

Mr. Power said the bureau is “not able to confirm whether or not this was a notifiable transaction.” He said the bureau must generally be given advance notice of a proposed transaction when an acquisition target’s assets in Canada, or its revenues from sales in or from Canada generated by those assets, exceed $93-million. If the combined Canadian assets or revenues of the parties and their respective affiliates in or from Canada exceed $400-million, the bureau must also be notified, Mr. Power added.

When the deal was announced earlier this month, the crypto companies said the merger would put together nearly $600-million in combined assets under custody, from a customer base of around 1.65 million users, with 1.6 million of them in Canada. Client assets under management do not count as company assets under the bureau’s test for advance notification, Mr. Skurka said.

“The Competition Bureau may review any merger or acquisition, regardless of size, to determine whether they will likely result in a substantial lessening or prevention of competition in any market in Canada,” Mr. Power said, without saying whether the bureau will be taking any action on the WonderFi deal.

Canada’s Competition Act allows the Commissioner of Competition to challenge a transaction during a one-year period following its completion, he said.

WonderFi has been on a spree of acquisitions since early last year, as it aims to consolidate Canada’s crypto sector and compete against the global giants operating here. It first bought Toronto-based firms Coinberry Ltd. and Bitbuy Technologies Ltd. in 2022, before planning the merger with CoinSmart and Coinsquare, both also based in Toronto, this year. WonderFi reached out to the bureau for the Coinberry deal but not for Bitbuy. Mr. Skurka said the company was “not 100 per cent certain” whether a review was required for either.

In early July, Mr. Skurka said that WonderFi plans to shut down CoinSmart in the coming months, pending regulatory and shareholder approvals, to “keep only the best parts of that business.”

This week, he added, the company will also wind down Coinberry, which is migrating all its assets and customers into the Bitbuy platform. “We’re very happy we already received a non-objection letter from the Ontario Securities Commission for this move,” Mr. Skurka said.

“These consolidations will allow us to offer an enhanced trading experience, and is a big part of our long-term strategy.”