An Australian court has sided with the Australian Securities and Investments Commission (ASIC) in a legal dispute over cryptocurrency startup Block Earner.
The court found that Block Earner breached the Australian Companies Act by offering unauthorized financial products, thereby breaching sections 601ED and 911A of the Act.
ASIC beats block grabber
In a recent legal battle between ASIC and a cryptocurrency startup, ASIC won as the block acquirer, the court ruled in ASIC's favor.
The court found that Block Earner's product offering breached the Australian Corporations Act, specifically sections 601ED and 911A. In the judgment, Judge Ian Jackman found that Brock Earner was operating without the required Australian financial services license and was in breach of the Act.
Additionally, the company was found to be operating an unregistered managed investment scheme relating to its products.
The judgment, published on January 31, outlines ASIC's order requests for Block Earner's 'Earner' and 'Access' products. The “Access” product is still on sale, but the “Earner” product will be discontinued in November 2022, just eight months after its release in March of the same year.
ASIC also argued that both products offered by Block Earner were financial products as they had similar characteristics to managed investment schemes.
ASIC further argues that this classification indicates that Brock Earner is in breach of the relevant provisions of the Corporations Act, as the company lacks an Australian Financial Services License (AFSL). ASIC argues that Block Earners breach sections 911A and 601ED(5) of the Act respectively if either the Earners or the Access Products are considered to be financial products or managed investment schemes.
After thoroughly considering the claims of both ASIC and Brock Arner, represented by its co-founder and CEO Charlie Caraboga, an Australian judge ruled in favor of ASIC. did.
The judge agreed with ASIC's arguments and found that the regulator had successfully demonstrated breaches of sections 601ED and 911A of the Act in relation to Earner products. Notably, the judge said ASIC did not substantiate similar claims regarding his Access products.
The decision marks ASIC's first successful case against a cryptocurrency company.
ASIC is waging a war against crypto fraud
In September 2023, Australian financial watchdog ASIC announced a new four-year plan aimed at strengthening consumer protection against digital fraud, including fraud related to cryptocurrencies.
This strategic move comes on the heels of a year that saw significant progress in addressing the organization's key goals. The agency's main focus is protecting vulnerable consumers and small businesses.
ME Bank was found guilty on January 19 after pleading guilty to criminal charges for providing false and misleading information in letters to mortgage customers and failing to notify them in writing of changes in annual interest rates or repayments.
The Federal Court fined ME Bank $820,000, of which $750,000 was earmarked for the breach under the ASIC Act and $70,000 for the breach under the National Credit Act.
The fraud stemmed from ME Bank's failure to accurately convey mortgage loan information to customers. The bank was found guilty of sending incorrect minimum repayment letters and failing to notify customers of changes in interest rates and repayments. The case was prosecuted by the Director of Public Prosecutions following an investigation by ASIC.
In another case, AFS licensees were required to register their financial advisors by a specified deadline. This requirement included the appointment of financial advisers to the Financial Advisers Register with approval. ASIC has encouraged licensees to register their financial advisors through ASIC Connect by the specified deadline.
