Shakepay Inc.

Shakepay Inc. (Shakepay) is admitted to membership in the Canadian Investment Regulatory Organization, as an Investment Dealer Member, effective January 8, 2025.

The head office is located at Suite 1800, 500 Place d’Armes, Montréal, Québec H2Y 2W2

Telephone: (450) 234-4044

The Executives are:

• AMIOUNY, Jean, Chief Executive Officer
• LEIGH, Andrew, Chief Compliance Officer
• KARAWANI, Wassim, Chief Financial Officer
• BREIDI, Roy, Chief Technology Officer
• RICHMOND, Eric, General Counsel

Concurrent with the approval of the membership of Shakepay, the CIRO Board of Directors also granted exemptive relief from certain requirements of the Investment Dealer and Partially Consolidated Rules (IDPC Rules) to Shakepay. In particular, the Board provided:

• relief from the requirement under IDPC Rule 4456 to maintain a financial institution bond (FIB insurance) providing coverage for all types of losses specified in that Rule; and
• relief from the requirement under IDPC Rule 4342 that client assets must be held at an Acceptable Securities Location and the requirement set out in Form 1 that imposes a capital penalty equivalent to 100% of the market value of the assets held at any non-Acceptable Securities Location

subject to the conditions described below.

1. Authority to Grant Exemptions

IDPC Rule 1302 permits the CIRO Board of Directors to exempt a Dealer Member from any provision of the Rules where it is satisfied that to do so would not be prejudicial to the interests of Dealer Members, their clients or the public. In granting an exemption, the Board may impose such terms and conditions as are considered necessary.

2. Exemptions Granted and Conditions

As is standard for exemption orders of this type, the exemption order also specified that:

• The Board of Directors reserves the right to revoke the exemptive relief granted to Shakepay, at any time, upon notice to the applicant.
• This exemption relief is void upon the earliest of the following taking place:
  • The implementation of any material amendments to the rules by CIRO or the provincial and territorial securities regulators relating to insurance requirements and/or the capital requirements arising from securities held in custody at a non-acceptable securities location. CIRO, and not Shakepay, will determine whether any rule amendments implemented are considered to be related to insurance requirements and/or the capital requirements arising from securities held in custody at a non-acceptable securities location and are considered to be material, thus rendering this exemption order void.
  • Shakepay’s breach of any of the representations made in its application for exemptive relief.
  • Shakepay’s breach of any of the conditions relating to the exemptive relief granted, respect to the Insurance Exemption and Custody Exemption.

Staff will only recommend approval of exemptive relief of this type under exceptional circumstances, and where the Dealer Member demonstrates that it has taken all reasonable steps to comply with CIRO Rules.

In addition, in connection with Shakepay’s application for membership, Shakepay made certain representations and agreed to provide certain undertakings to CIRO.

Insurance Exemption

The CIRO Board of Directors granted to Shakepay exemptive relief from the requirement under IDPC Rule 4456 to maintain FIB insurance providing coverage for all types of losses specified in that Rule.

This exemption is subject to the following conditions:

1. The relief and its conditions apply only to Shakepay’s distribution of crypto contracts and the operation of a platform that facilitates the buying, selling and holding of crypto assets.
2. Shakepay shall obtain an FIB policy that provides coverage for all its crypto assets held in internal custody as well as external custody, once one becomes available to Shakepay.
3. Shakepay will make best efforts to promptly obtain additional or excess FIB coverage with respect to crypto assets held in cold storage to address any coverage deficiency.
4. Shakepay shall obtain a Crime bond policy, or other insurance coverage acceptable to CIRO, pertaining to Crypto Assets held that satisfies the following:
   1. the loss coverage under the Crime bond policy(s) must be equal to or greater than two times that which would be required under CIRO’s minimum insurance coverage formula for assets held, or the other insurance coverage must fulfill the requirements of CIRO’s minimum insurance coverage formula for assets held
   2. the terms and conditions of the insurance policy(s) must be acceptable to CIRO
   3. any insurance deductible under the Policy(s) must be deducted when Shakepay determines its risk adjusted capital.
5. Shakepay must ensure that a Shakepay Trust Account is opened at an “Acceptable Institution” for the purposes of IDPC Rule 1201 and Form 1 and is operated in a manner acceptable to CIRO.
6. Shakepay must, in the event it determines that it has a coverage deficiency in any of its securities locations, fund the Shakepay Trust Account dedicated to covering an amount greater than or equal to CIRO’s minimum FIB insurance coverage formula for client assets.
7. Shakepay is prohibited from using client free credit cash balances to fund the Shakepay Trust Account.
8. When determining its risk adjusted capital, Shakepay must deduct the Trust Account balance.
9. Shakepay must obtain and review the SOC 2 Type 2 reports from its custodians on an annual basis, and provide an annual SOC 2 report, that includes testing that covers the applicable controls securing its Fireblocks ecosystem.

Custody Exemption

In respect of Shakepay’s proposed custodian, BitGo Trust Company Inc. (BitGo) of Shakepay’s crypto assets, the CIRO Board of Directors granted exemptive relief from the requirement under IDPC Rule 4342 that client assets must be held at an Acceptable Securities Location and the requirement set out in Form 1 that imposes a capital penalty equivalent to 100% of the market value of the assets held at any non-Acceptable Securities Location.

The exemptive relief is subject to the following conditions:

1. The relief and its conditions apply only to Shakepay’s distribution of crypto contracts and operation of a platform that facilitates the buying, selling and holding of crypto assets.
2. At all times, Shakepay will not hold less than 80% of the total value of all crypto assets held on behalf of clients with one or more third-party custodians that have been approved by CIRO and are functionally independent of Shakepay, within the meaning of National Instrument 31-103.
3. This limited relief will be granted to Shakepay for an initial period of one year and may be extended at CIRO’s discretion if it is determined that BitGo is making sufficient progress toward meeting the ASL requirements under the General Notes and Instructions to Form 1.
4. Shakepay must ensure the total market value of crypto asset holdings held at BitGo does not exceed the criteria specified by CIRO (the cap). The cap will be reviewed, at a minimum, on a bi-annual basis by CIRO staff and may be adjusted at staff’s discretion. Shakepay must promptly notify CIRO if Shakepay believes Shakepay may exceed the cap.
5. Shakepay must provide clear disclosure informing clients of the regulatory oversight of BitGo by the South Dakota Division of Banking (SDDB) and provide a link to SDDB’s website. The content and form of this disclosure will require the approval of CIRO staff, and clients must be required to acknowledge they have read and agreed to the disclosure.
6. Shakepay must ensure, and regularly confirm to CIRO, that BitGo, at all times:
   1. maintains its good standing status as a South Dakota trust company,
   2. maintains its good standing status with, and continue to be, regulated by SDDB, and
   3. complies with the SDDB capital and insurance requirements.
7. Shakepay will obtain from BitGo a SOC 2 Type 2 report to be provided to CIRO on an annual basis.
8. Shakepay will obtain from BitGo and provide to CIRO a copy of the annual audited financial statements prepared for BitGo.
9. Shakepay’s custody agreement with BitGo must be in a form acceptable to CIRO, and Shakepay must ensure that any proposed material amendments to the agreement are approved by CIRO.
10. Shakepay will promptly notify CIRO if any United States regulatory authority makes a determination that BitGo, for Shakepay client’s crypto assets, is not permitted by the regulatory authority to hold client crypto assets.
11. Shakepay will notify CIRO promptly, of any material breach or failure of BitGo’s systems of controls or supervision in relation to the crypto assets held by BitGo, and the steps taken by Shakepay to address each such breach or failure.

For questions and further information regarding this Bulletin, please contact [email protected].