Authors: Michael Bacina, Steven Pettigrove, Jake Huang, Lola Hickey, Luke Misthos
ASIC, the corporate regulator, has commenced proceedings in the Federal Court against a crypto fintech company, Block Earner, for allegedly offering unlicenced financial products to retail investors.
ASIC Deputy Chair, Sarah Court, said that:
We are concerned that Block Earner offered financial products without appropriate registration or an Australian Financial Services licence, leaving consumers without important protections. Simply because a product hinges on a crypto-asset, does not mean it falls outside financial services law.
Block Earner offered several yield earning products based on crypto-assets, that were called USD Earner, Gold Earner and Crypto Earner. ASIC alleges that these are financial products and an unregistered managed investment scheme which required Block Earner to be licensed.
ASIC Deputy Chair, Sarah Court, noted that:
ASIC is aware that many consumers are interested in purchasing or investing in crypto-assets. Crypto-assets are risky, inherently volatile and complex and ASIC remains concerned that potential investors in crypto-assets may not fully appreciate the risks involved. ASIC supports the development of an effective regulatory framework covering crypto-assets to protect consumers and investors.
ASIC alleges that Block Earner should have obtained a licence as it created a facility through which a person makes a financial investment, the products were an unregistered managed investment scheme and/or were a derivative. Block Earner was seeking to link investors with Aave and Compound, prominent DeFi lending protocols which compensate for lending stablecoins.
This court action follows proceedings initiated by ASIC last month against BPS Financial Pty Ltd for allegedly making misleading statements and unlicensed conduct in relation to its crypto asset Qoin and against Holon Investments Australia Limited for offering or distributing three funds to retail investors because of non-compliant target market determinations.
ASIC is seeking declarations, injunctions, and pecuniary penalties from the Court in this matter. The date for the first case management hearing is yet to be scheduled by the Court.
