Executives with the startup formerly known as Facedrive Inc. will be banned from serving as public company directors and will pay financial penalties after issuing misleading news releases.
The Capital Markets Tribunal, a division of the Ontario Securities Commission, approved a settlement agreement on Friday between the commission and Facedrive, which is now known as Steer Technologies Inc. STER-X
Sayan Navaratnam, the company’s former chair and chief executive, is prohibited from acting as a director or officer of a publicly traded company for three years, while current chair Junaid Razvi and CEO Suman Pushparajah are banned for two years. The bans do not apply to any roles at Steer.
Mr. Navaratnam, who remains the company’s largest shareholder, will pay the commission $90,000 in fines and costs, while Mr. Razvi will pay $55,000. Mr. Pushparajah will pay $15,000 in costs, and his lawyer noted at the hearing Friday that he will voluntarily pay a fine. Steer faces a $300,000 penalty.
“The facts that give rise to the settlement agreements do involve serious misconduct,” said OSC lawyer Rikin Morzaria at the hearing.
The OSC released a statement of allegations earlier this month stating that Steer put out contradictory and misleading news releases about TraceSCAN, a COVID-19 contact tracing technology, overstating its consumer-readiness and its capabilities. Some of the releases gave the impression TraceSCAN was ready for purchase, when in fact the company had only developed a prototype. Another highlighted features that had yet to be tested or developed.
The company also failed to correct information about the release of certain TraceSCAN features after it was clear the timeline was inaccurate, according to the OSC.
The releases were issued between April, 2020, and January, 2021. The following month, the Ontario government announced a $2.5-million grant for the company to help develop TraceSCAN, and said the devices would be manufactured in the province. The Globe and Mail later reported that the company bought completed hardware from China.
Before rebranding as Steer, Facedrive began as a ride-hailing company and expanded into food delivery, online retail and, as the pandemic took hold, contact tracing. It also touted a relationship with actor Will Smith.
The company’s valuation ballooned to more than $5-billion on the TSX Venture Exchange in 2021, surpassing Maple Leaf Foods Inc. and CI Financial Corp., despite minimal revenue and recurring losses. Its stock price has since crashed by 99 per cent and it now trades for pennies.
The OSC also singled out a consulting agreement Steer arranged with a company called Medtronics Online Solutions Ltd. in 2020. The CEO of Medtronics is the editor of a website called OilPrice.com, which ran a series of “overly promotional” articles about Steer, according to the OSC. One of the pieces on OilPrice.com compared Mr. Navaratnam to Elon Musk, and portrayed him as a transportation visionary.
The OSC alleged the arrangement with Medtronics is contrary to the public interest.
On Friday, the tribunal agreed with OSC staff that the three executives failed to ensure the news releases were accurate before being published, and that Mr. Navaratnam and Mr. Razvi knew or ought to have known that OilPrice.com was publishing biased and promotional articles about the company.
As part of the settlement, an independent consultant will review Steer’s disclosure practices every quarter for the next two years, among other remedial measures.
Vic Fedeli, Minister of Economic Development, Job Creation and Trade, has defended the decision to provide funding to Steer. He told The Globe earlier this month that Steer received only $2.1-million of the TraceSCAN grant because the company stopped meeting performance targets for job growth and production levels.
“They delivered exactly what they told us they would deliver and up until the end. So we had no reason to doubt any of the numbers,” Mr. Fedeli said. “But once they stopped meeting their deliverables to us, we stopped writing the cheques.”
The grant was delivered through the $100-million Ontario Together Fund, which provided money to companies and organizations for projects related to pandemic response. Mr. Fedeli said the government will be conducting an audit of the program.