Investor Decks: the Risk is Real


Investor Decks: the Risk is Real


A deck with misleading statements can carry serious liability for a company and its leadership.


Just about every company that wants to raise money uses an investor deck (often a Powerpoint presentation about the corporation).

But a deck with misleading statements can carry serious liability for a company and its leadership – even if you include a disclaimer, even if the deck is in “draft” form, and even if your company is private and not listed on any stock exchange.

Take the recent settlement decision in respect of NextBlock Global Limited for example.  NextBlock (a private company) and its director and CEO Alex Tapscott were fined over $1.1 million by regulators for misleading statements in NextBlock’s investor deck – and that was after NextBlock had been wound up in an attempt to limit further damage.

Don’t Be Like NextBlock

NextBlock’s fate was avoidable.  To help reduce your own risk from using a deck:

  • Get clear advance consent from any person or company you refer to in the deck.
  • Make sure business relationships are accurately described – for example, if you only have a letter of intent, don’t make it sound like you have a binding definitive agreement in place.
  • Add your assumptions to any projections or forward-looking statements.  Explain: what has to happen, and when, for those projections to come true?  Which facts, pricing plan, or market conditions are you relying on?
  • Assume any version of your deck will be circulated widely.  Keep track of which version goes to whom so that you can correct errors or provide updates to investors as you grow.
  • Get legal advice.  Filing requirements and other legal obligations may apply.

NextBlock’s story stands to remind all companies, even private ones, that materials provided to investors must be carefully vetted for accuracy.

The Misleading Statements

In the summer of 2017, blockchain was booming.  NextBlock, whose business model was to invest in promising blockchain initiatives, courted over 100 prospective investors and raised about $20 million with an investor deck that described the company’s business.

The deck touted NextBlock as having “access” and “unparalleled relationships” to leaders in the blockchain space.  Here’s an actual excerpt:

And here’s the page where NextBlock described their advisors, some of the people behind some of those “unparalleled relationships”:

The problem was, at least four of the advisors on that list (Kathryn Haun, Vinny Lingham, Dimitry Buterin, and Karen Gifford) had never agreed to be associated with NextBlock. In fact, Gifford had never been so much as approached by the company at all.

As CEO of NextBlock, Tapscott was ultimately responsible for the deck.

The Revelation

NextBlock planned to go public.  It had Canaccord Genuity Group and CIBC World Markets Inc. lined up to support its next financing, and about $200 million in advance orders by October 2017.  The future was golden.  Then someone looked a little closer at its deck.

An article on Forbes.com revealed the misleading use of advisors, headlined “Alex Tapscott’s Crypto VC Firm Going Public With $100M CAD Falsely Touted 4 Blockchain Stars as Advisors”.  Tapscott insisted that the deck had not gone out electronically (clearly it had); that the advisors at issue were only present in early “drafts” of the deck; and that he had not in fact used those advisors in presentations to market his transaction.

But various sources told Forbes that many investors had put money into NextBlock because of its purported advisors, including Kathryn Haun in particular (her startup Coinbase became the first crypto “unicorn”, or billion-dollar public company).

The Fallout

Within a week of the Forbes article being published:

  • CIBC resigned;
  • Canaccord decided not to move forward as lead agent on the financing;
  • investors representing $187 million backed out of the going-public financing; and
  • NextBlock informed investors that it would return their principal investments to them, along with any profits.

Inside of a month of the article, NextBlock had initiated a wind-up in Ontario court, which is effectively the death of the company.  Even though NextBlock had been wildly profitable and initial investors made a 140% return, that wasn’t enough to deter the Ontario Securities Commission (OSC) from commencing proceedings against NextBlock and Tapscott personally.

NextBlock was fined $700,000 plus costs of $100,000, and Tapscott was personally fined $300,000 by the OSC for their roles in misleading investors contrary to the Securities Act (Ontario).  The U.S. Securities and Exchange Commission fined Tapscott an additional US$25,000.

Tapscott also offered to write an open letter about the impact and consequences of his misconduct and to deliver presentations on his misconduct to students at three Canadian business schools in the context of an ethics course, offers which were both accepted by the OSC in the settlement.

In a news release about the NextBlock settlement, Jeff Kehoe, Director of Enforcement at the OSC, said “We will not tolerate market participants who play fast and loose with the facts when providing offering memoranda to prospective investors, including marketing decks.”