Federal Court spares crypto fund from ASIC lashing
The Federal Court has relieved cryptocurrency exchange Block Earner from its liability to pay a penalty for its breach of the Corporations Act despite an earlier ruling that it operated without a requisite financial services licence.
The Court in earlier deliberations found that Block Earner had indeed contravened several sections of the Corporations Act 2001 – firstly, in operating its ‘Earner’ product without an Australian financial services licence, and also operating the product without registering it as a managed investment scheme.
Financial services regulator ASIC, which pursued the civil action against the crypto firm, said that the ‘Earner’ product met the definition of a managed investment scheme and a facility for making a financial investment under the law and as such required an Australian Financial Services Licence (AFSL).
The product operated for around eight months – between 17 March and 16 November 2022.
ASIC said it took the case due to its concern that Block Earner left consumers “without important protections”.
“Simply because a product hinges on a crypto-asset, does not mean it falls outside financial services law,” ASIC wrote.
However, Justice Ian Jackman in his written judgement stated the firm “acted honestly and not carelessly when it offered the Earner product”, with the contraventions arising “in an uncertain regulatory environment where government bodies were unsure as to the extent to which the financial product regime in the Act applied to cryptoasset service providers such as Block Earner”.
Jackman added that the crypto firm, upon receiving legal advice from a “leading law firm”, believed “there was no identified risk that the Earner product would breach any laws or regulations”.
“In the present case, I am satisfied that Block Earner acted honestly. The unchallenged evidence of [Block Earner chief executive Charlie] Karaboga is that at the time the Earner product was launched, he considered whether an AFSL was required to provide that product, and formed the view that it was not a regulated financial product and that an AFSL was not required.”
ASIC may also be liable for damages associated with a 9 February media release, with Justice Jackman stating that “Block Earner is correct to submit that ASIC’s media release was unfair and misleading”.
ASIC said it is currently reviewing the Court’s decision.
Dear ASIC, another case totally unrelated to Real Advisers that ASIC will bill Advisers for ?
How much charged to Advisers here ASIC for legal & court costs, case lost and compensation to pay ?