An Australian court has sided with the Australian Securities and Investments Commission (ASIC) in a legal dispute involving the crypto startup Block Earner.
The court determined that Block Earner violated the Australian Corporations Act by providing an unlicensed financial product, thereby infringing upon sections 601ED and 911A of the Act.
ASIC prevails against Block Earner
In the recent legal battle between the ASIC and crypto startup; Block Earner, the ASIC emerged victorious as the court ruled in its favor.
The court found that Block Earner’s product offering violated Australia’s Corporations Act — specifically sections 601ED and 911A. In this ruling, Judge Ian Jackman determined that Block Earner operated without the necessary Australian financial services license, breaching the Act.
Additionally, the company was found to have run an unregistered managed investment scheme related to its product.
The judgment, issued on Jan. 31, outlined ASIC’s request for an order against Block Earner’s “Earner” and “Access” products. While the “Access” product is still available, the “Earner” product was discontinued in November 2022, just eight months after its launch in March of the same year.
The ASIC also asserted that both products offered by Block Earner qualify as financial products due to their characteristics resembling a managed investment scheme.
ASIC further argues that this classification indicates Block Earner’s violation of relevant sections of the Corporations Act, as the company lacks an Australian Financial Services Licence (AFSL). ASIC contends that if either the Earner or Access products are deemed financial products or managed investment schemes, Block Earner has breached sections 911A and 601ED(5) of the Act, respectively.
Following a thorough examination of arguments from both ASIC and Block Earner, represented by its co-founder and CEO, Charlie Karaboga, an Australian judge ruled in favor of ASIC.
The judge concurred with ASIC’s assertion, affirming that the regulator had successfully demonstrated violations of sections 601ED and 911A of the Act regarding the Earner product. Remarkably, the judge observed that ASIC did not substantiate analogous allegations concerning the Access product.
This decision represents ASIC’s first successful legal action against a crypto company.
ASIC waging war against crypto scams
In September 2023, ASIC — Australia’s financial watchdog — announced a new four-year plan designed to enhance consumer protection against digital scams, encompassing fraudulent activities related to cryptocurrencies.
This strategic move comes on the heels of a year marked by significant progress in addressing the organization’s key objectives. The agency’s primary focus is on shielding vulnerable consumers and small businesses.
On Jan. 19, ME Bank was sentenced after admitting to criminal charges for providing false and misleading information in letters to its home loan customers and neglecting to inform them in writing about changes in annual interest rates and repayment amounts.
The Federal Court imposed a penalty of $820,000 on ME Bank, with $750,000 allocated for breaches under the ASIC Act and $70,000 for violations under the National Credit Code.
The misconduct stemmed from ME Bank’s failure to accurately convey home loan information to its customers. The bank was found guilty of sending incorrect minimum repayment letters and neglecting to notify customers of changes in interest rates and repayments. The case was prosecuted by the Commonwealth Director of Public Prosecutions following an investigation by ASIC.
In a separate incident, AFS licensees were mandated to register their financial advisers by a specified deadline. This requirement entailed appointing a financial adviser to the Financial Advisers Register upon authorization. ASIC encouraged licensees to register their financial advisers through ASIC Connect by a designated deadline.