|9 Months Ended|
Sep. 30, 2020
|Investments, All Other Investments [Abstract]|
Note 7. Investments
As of December 31, 2019, the Company’s cost investment in Coinsquare Ltd. (“Coinsquare”) totaled approximately $9.4 million representing approximately an 11.8% ownership on a fully diluted basis. The Company is a non-affiliated shareholder in Coinsquare, which represents a passive investment made by the Company.
During June 2020, the Company became aware of allegations brought by the Ontario Securities Commission (the “OSC”) that Coinsquare and certain of its executives and directors engaged in systematic “wash trading” of cryptocurrencies on its Coinsquare market to manipulate the market’s trading volume during 2018 and 2019.
Subsequently, on July 21, 2020, a hearing panel of the OSC entered an order (the “Order”) approving the settlement agreement between OSC, Coinsquare, and certain of its executives and directors (the “Settlement Agreement”), in which they admitted to breaches of Ontario securities laws and/or conduct contrary to the public interest including, market manipulation through reporting inflated trading volumes on its Coinsquare Market, misleading its clients and investors about these trading volumes, and taking reprisal against an internal whistleblower who brought this conduct to the attention of the named executives and directors. The Order requires certain oversight and governance procedures and to prohibit the named executives and directors from engaging in certain activities with respect to Coinsquare; additionally, the named executives and directors were required to resign from Coinsquare and Coinsquare and the named executives and directors were required to pay penalties and costs totaling approximately CAD 2.2 million.
Accordingly, the Company determined there were indicators that would cause a 100% impairment of the Coinsquare investment and observed price changes, which was recorded as of June 30, 2020. The Company therefore recorded an impairment expense of $9.4 million for its investment in Coinsquare during the nine months ended September 30, 2020, as reflected in the accompanying unaudited condensed interim consolidated statements of operations.
During the quarter ended September 30, 2020, the Company notified Coinsquare that based upon the OSC settlement related issues, it is evaluating all options to recover its investment in Coinsquare and the Company has engaged Canadian based litigation counsel to assist with this matter.
Riot Blockchain, Inc. and Subsidiaries
Notes to Condensed Interim Consolidated Financial Statements
The investment in Verady, Inc. (“Verady”) is valued at cost, less any impairment, plus or minus changes resulting from observable price changes. During the nine months ended September 30, 2020 the investment in Verady totaled approximately $0.2 million, and the Company determined there were no indicators that would cause an impairment. There were no price changes in orderly transactions for identical or similar investments in Verady.
As of September 30, 2020, and December 31, 2019, the fair value of the TessPay Inc. shares owned by the Company is approximately $0.1 million, calculated based upon the April 10, 2019 funding price.
The entire disclosure for investments accounted for under the cost-method. The carrying amount of such investments may be adjusted, for example, distributions in excess of cost (return of capital) or for other-than-temporary impairments. The cost method and lower-of-cost or market, an adaptation of the cost method, is generally followed for most investments in noncontrolled corporations, in some corporate joint ventures, and to a lesser extent in unconsolidated subsidiaries in which the entity does not have the ability to exercise significant influence.
No definition available.