A Vancouver-area marketing company is accusing a former executive of taking off with up to $7 million in cryptocurrency and then saying it was lost when his computer "died."
Last month, a B.C. Supreme Court justice ordered Jason Bradley Arnold, the former chief operating officer of Shair.Com Global Digital Services Ltd., to hand over his company laptop — broken or not — and all information about the digital wallets that hold the missing money.
"Given the nature of digital currencies and difficulty in tracking ownership of digital wallets, I am satisfied that there is a reasonable apprehension that the currencies may be transferred outside of the jurisdiction," Justice Ronald Skolrood wrote in an Aug. 2 ruling, posted online this week.
But the judge declined to freeze Arnold's assets — including three homes, a rural plot of land, two vehicles, two ATVs and a boat — while a lawsuit filed by Shair.com is being decided.
Skolrood said the estimated value of the missing money was just a guess, and there was no evidence Arnold intended to dispose of his property.
"To tie up almost $3 million of the defendant's assets in the face of such a speculative claim would, in my view, be unreasonable," Skolrood wrote.
$18,500 invested in Bitcoin
Shair.Com filed suit against Arnold in July, alleging he had unjustly enriched himself, misappropriated company property and breached his duties to the firm.
Arnold could not be reached for comment Wednesday, and has yet to file a response to the company's claim. He did not appear in court last month to argue against the preservation order for his company laptop, or send a lawyer in his defence.
According to his LinkedIn profile, he is "evaluating new and exciting opportunities."
The court documents in this case provide a fascinating glimpse at the roller-coaster world of cryptocurrency, and the potential headaches for anyone pumping cash into the market without a full understanding of what's going on.
Arnold was hired in 2011 as chief operating officer for Shair.com, an online marketing and publishing firm, according to Skolrood's ruling.
From the beginning, he presented himself as "being very knowledgeable and experienced in computer technology," the judge wrote.
That's why Arnold took the lead when the company started looking into Bitcoin and other digital currencies.
In the summer of 2014, the company gave him $18,500 to buy Bitcoin. It appears he then used some of that Bitcoin to buy another cryptocurrency known as Whitecoin, the judge said.
"It is apparent from the record that other members of the plaintiff company, including the now president and CEO Mr. [Kelly] Alfreds, had little knowledge or involvement in what the defendant was doing vis‑à‑vis the digital currency, and the defendant did little to keep them informed," Skolrood wrote.
The company estimates that if its entire investment had remained in Bitcoin, it would be worth about $225,000 today, but if it had been fully converted to Whitecoin, its value would be a whopping $5.3 million US — or about $7 million CAD.
'Everything was lost'
Arnold left the company in April 2017, but it wasn't until eight months later that people at Shair.com realized he hadn't returned his company laptop. They also discovered he hadn't left any information about the digital wallet that held the company's cryptocurrency, according to the ruling.
When they got in touch with Arnold, he allegedly said he couldn't hand over the wallet information because his laptop had "died" and "everything was lost on it, including the wallet."
He did, however, have 26 units of another digital currency called Dashcoin, which he transferred back to Shair.com in January of this year, when it was worth close to $29,000, according to court documents.
Shair.com later brought in a digital currency consultant to investigate Arnold's activities, and she found at least nine digital wallets linked to the company, the ruling says.
She discovered that Arnold had created his own digital currency, known as "Shaircoin," and advertised opportunities for people to earn it by sharing certain content online, according to an application filed by the company.
Arnold also allegedly became interim president for the Whitecoin Foundation, an organization created by the makers of Whitecoin, without the knowledge of his employer.
But in the end, the investigator was unable to pinpoint the current location or value of the missing currency.
None of the allegations in the company's statement of claim have been proven in court, and no date for trial has been set. According to the ruling, Arnold is still a shareholder in Shair.com.