ASIC welcomes legal clarity from Block Earner court decision
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More news: While the court found Block Earner provided unlicensed financial services, ASIC was unsuccessful in part of its case, which alleged the company's variable yield crypto-asset based offering was a financial product.
The court did not accept ASIC's characterisation of the "access product" as a managed investment scheme, investment facility or derivative.
What they said: ASIC deputy chair Sarah Court said in a media release following the court decision that it provides "some clarity as to when crypto-backed products should be considered financial products which require licensing under the law".
"Crypto-assets are risky, inherently volatile and complex. ASIC remains concerned that consumers do not fully appreciate the risks associated with products involving crypto-assets and today's decision is an important step forward to ensuring there are appropriate protections for consumers," Court said.
Block Earner's crypto product breached corporations act, court finds
The news: Crypto startup Block Earner has breached the Australian Corporations Act by operating a financial services business without a license and operating an unregistered managed investment scheme, Federal Court of Australia Judge Ian Jackman has said.
The numbers: While penalties are yet to be decided in the case, the Australian Securities and Investments Commission (ASIC), which brought the lawsuit, can pursue civil penalties against companies of up to 50,000 penalty units (currently $15.65 million), three times the benefit obtained and detriment avoided to the company through the unlawful conduct, or 10% a company's annual turnover — capped at $782.5 million.
The context: While the case isn't the first crypto-linked lawsuit ASIC has brought before the courts, today's court decision is the first outcome on a string of cases launched by the regulator in late 2022 around whether crypto products are financial products and should be regulated as such.
The matter will return to court on 1 March for an administrative hearing to plan a further hearing over penalties. Block Earner will also be expected to inform Jackman at that point as to whether the company will request to appeal his decision.
