The Australian Securities and Investments Commission (ASIC) has filed an appeal against a federal court ruling that absolved cryptocurrency provider Block Earner of paying a penalty for offering unlicensed financial services related to its digital assets product.
The Australian regulator announced on Tuesday that it has appealed the Federal Court’s decision and will continue to seek the imposition of a financial penalty. In the past, it had requested AU$350,000.
Interestingly, the Court had previously found that Block Earner engaged in unlicensed financial services and operated an unregistered managed investment scheme from March to November 2022.
Despite acknowledging the seriousness of Block Earner’s contraventions, the Court granted relief on June 4, citing among other factors that the company had acted honestly and not carelessly when it offered the Earner product. ASIC has challenged this ruling, filing a Notice of Appeal that outlines the grounds on which it believes the Court erred in granting the relief.
We have appealed the Federal Court’s decision to relieve Block Earner from liability to pay a penalty for contraventions related to its crypto-related Earner product https://t.co/zAzlxNfjqv
— ASIC Media (@asicmedia) June 18, 2024
“From the beginning, it was never our intention to break or circumvent the rules,” Charlie Karaboga, CEO of Block Earner, commented after the latest Court’s decision. “As a startup, we did everything within our power to comply, including obtaining legal advice and creating a comprehensive risk framework.”
What Now?
Block Earner, an AUSTRAC-registered digital currency exchange that operates without an Australian Financial Services (AFS) license, had faced allegations from ASIC that both its fixed-yield Earner product and its variable-yield Access product constituted financial products requiring a license.
While the Court upheld ASIC’s claims regarding the Earner product, it dismissed the allegations related to the Access product. ASIC has confirmed it will not appeal the Court’s findings on the Access product.
“Crypto-backed products should be considered financial products that require licensing under the law,” Sarah Court, ASIC’s Deputy Chair, commented in February. “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.”
The Full Federal Court will hear ASIC’s appeal on a date yet to be determined. The outcome could set a precedent for how Australian regulators approach enforcement actions against crypto firms and the standards to which such firms are held in complying with financial services laws.
