Australian crypto exchange Mine Digital falls into administration
In July, the Financial Review revealed a major legal stoush between ACCE and a self-managed super fund over $1.6 million lost to an international fraud ring. Scammers used the crypto exchange to facilitate the movement of money from investors they tricked using a sham company called 500 Investments. The Financial Review does not suggest that the company’s management was aware of or involved in these, or any other scams.
The 500 Investments scam is what is known as a social engineering scam, where fraudsters manipulate victims with realistic situations, impersonating officials from organisations to trick people into handing money over.
‘The matter is not over’
The SMSF trustees allege ACCE should have done more to weed out fraudsters using their services to scam people.
ACCE’s legal filings say there was no mistake on its part and is fighting the case. It said the SMSF intended to pay money into ACCE’s accounts for them to be accessed by third parties, and ACCE itself had no knowledge of any scam.
The SMSF, called Lloyd’s Wharf, said it would continue to pursue ACCE.
“As far as our client is concerned, the matter is not over, and we will be investigating the circumstances of the company’s solvency with vigour,” said Andrew Tragardh, founder of law firm Duxton Hill.
The Financial Review has contacted ACCE’s legal representatives Piper Alderman for comment.
It is not the first time ACCE, or Mine Digital, has been caught up in an international fraud. An investigation last year showed fraud victims, who thought they were buying high-yield bonds from investment banks such as Citibank, Nomura and IPM Investors, transferred deposits into ACCE accounts, among others, where scammers immediately transferred it out of the country.
ACCE registered as a company in Australia in June 2018, but its financial reports are not available with the corporate regulator. This would indicate it is defined as a small proprietary company and that it did not meet at least two of the criteria needed to require reporting. Those criteria are making at least $50 million in revenue, assets being worth $25 million or more, or having at least 100 employees.
After a long bull run, the sector has entered a so-called crypto winter. The price of bitcoin, the most traded cryptocurrency, has fallen from nearly $90,000 in November last year to just under $29,000 today.
As a relatively young industry, experts think poor risk management, lax regulation and instability within crypto markets have previously been glossed over. However, restructuring and advisory firm McGrathNicol reckons many operators will be forced to close and there will be fewer than 10 Australian digital asset exchanges that have strong corporate governance, operate efficiently and have not leveraged.
Last year, a senate committee on Australia as a technology and financial centre heard there were no rules for external audits or IT security standards for crypto exchanges in Australia. The application process for AUSTRAC licensing requires an anti-money laundering/know your customer policy, a pre-written one that can be easily obtained online, and then an online form.
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