ASIC defeated in major crypto case
ASIC has lost a major crypto case after the Federal Court ruled the product offered by comparison site Finder was not a debenture.
The regulator had previously alleged that Finder’s product Finder Earn was a financial product and therefore the firm had been providing unlicensed financial services.
ASIC commenced civil penalty proceedings in December 2022 against Finder Wallet, a subsidiary of comparison website Finder, for allegedly providing unlicensed financial services, breaching product disclosure requirements, and failing to comply with design and distribution obligations (DDO) in relation to its crypto-asset related product Finder Earn.
Between February and November 2022, ASIC alleged Finder Earn customers deposited Australian dollars into their accounts, which were then converted to an Australian dollar-denominated “stablecoin” called TAUD and allocated to Finder Wallet to use for its own working capital. Finder Wallet paid customers (in Australian dollars) an annual compounding return of either 4.01 per cent or, in some circumstances, 6.01 per cent, in exchange for the use of their funds by Finder Wallet.
The product was sunsetted by Finder in November 2022 and all customer capital was returned.
ASIC’s argument hinged on the fact that it alleged the Finder Earn product was a “debenture” which would have required an Australian financial services licence.
However, in the Federal Court, Justice Brigitte Markovic ruled it was not a debenture and therefore Finder did not provide unlicensed financial services in relation to Finder Earn.
“ASIC has not established that the Finder Earn product is a debenture within the meaning of a s 9 of the Corporations Act. As each of the contraventions of the Corporations Act alleged by ASIC is predicated on establishing that the Finder Earn product is a debenture, those contraventions cannot be made out,” she said in her judgment.
ASIC executive director, enforcement and compliance, Tim Mullaly, said: “ASIC pursued this matter because we considered that this product was being offered without the appropriate licence or authorisation and therefore without the benefit of important consumer protections.”
Reacting to the judgment, Finder global chief executive and co-founder, Frank Restuccia, said: “We are proud to have developed Finder Earn as a way for Australians to earn yield on their cryptocurrency investments in what was an ultra-low interest rate environment.
“We are delighted with this outcome, which confirms that Finder was compliant with our regulatory obligations in offering Finder Earn to our customers. We understand and respect the importance of good regulation to protect consumers and we engaged openly and proactively with ASIC from the outset.”
Executive chair and co-Founder, Fred Schebesta, added: “Innovation always moves faster than regulation, and this case is a great example. It highlights the need for more open communication between innovators and regulators, to navigate emerging sectors by ensuring a collaborative approach to both progress and compliance.”
ASIC said it will consider the judgment carefully and has 28 days to lodge an application to appeal to the Federal Court.
AUTHOR
Laura Dew
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This is clearly, in my opinion, a financial product - and I have a lot of experience with financial products. Why ASIC would frame its case this way puzzles me. I'm sure they had their reasons. but they seem to have made the defense extremely simple.
So glad to see ASIC pulled up, it waas beginning to become a law to it'self
i just remember back BEFORE licensing,there were never guy's getting band or going to court was a very unusual situation. The mentallity of the people who ram life companies was quite unlike the people we see now in charge og fund management and t some of the people who use them.
To just think they can get away with some of the stunts beggars belief . JG