Crypto start-up Block Earner loses ASIC case

The start-up had argued that it had considered itself a “digital currency exchange”, so thought it only had to meet the light-touch AUSTRAC registration process and did not require oversight from ASIC.

But the court agreed with ASIC’s allegations that Block Earner’s fixed rate products were financial products that should have been licensed because it was creating a facility through which a person makes a financial investment and/or was a managed investment scheme.

However, ASIC lost the second part of its case, which targeted another Block Earner product called “DeFi Access”. Rather than take customer funds, invest them in other protocols, and return a fixed “yield”, this product simply connected the customer directly with protocols that returned a variable yield.

Justice Jackman dismissed ASIC’s claim that this DeFi Access product was also a managed investment scheme. Block Earner welcomed this decision as the DeFi Access product is still operating in market, whereas the Earner product was closed before ASIC brought its case in November 2022.

“This judgment doesn’t affect our operations, we moved on from the Earner product over a year ago,” James Coombes, head of business at Block Earner, said in a statement.

ASIC chases other crypto companies

Block Earner now operates as an exchange and is an authorised representative under a credit licence.

The crypto industry has long been agitating for fresh regulations that govern the controversial technology amid a proliferation of new products.

These new products include decentralised autonomous organisations, or DAOs, which are types of companies managed through software, as well as DeFi products which use crypto technology to automate banking services like borrowing and lending.

But ASIC has maintained that the existing financial services framework has enough covenants to capture these new products.

As such, the regulator has brought several other actions against crypto companies. The regulator is currently suing Gold Coast-based BPS Financial over a crypto product known as Qoin.

Finder.com is also defending itself against an ASIC lawsuit, which alleges the comparison website provided unlawful financial advice and put customers at risk by offering its Finder Earn product without a proper licence.

ASIC argues the product was a debenture, which is a long-term security that yields a fixed interest rate and is often used by companies to borrow money.