ASIC has appealed the Federal Court’s decision to dismiss ASIC’s proceedings against Finder Wallet Pty Ltd for allegedly providing unlicensed financial services, breaching product disclosure requirements and failing to comply with design and distribution obligations in relation to its crypto-asset related product ‘Finder Earn’.
ASIC had alleged that the Finder Earn product was a debenture. The Federal Court disagreed and dismissed ASIC’s proceedings on 14 March 2024.
ASIC has appealed this decision because it is concerned that the Finder Earn product was offered without the appropriate licence or authorisation and therefore without the benefit of important consumer protections.
The appeal will be heard by the Full Federal Court on a date to be determined.
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Background
Finder Wallet is a subsidiary of comparison website Finder.com and an AUSTRAC-registered Digital Currency Exchange.
Finder Wallet offered Finder Earn between late February and 10 November 2022. Finder Earn customers deposited Australian dollars into their accounts, which were then converted to an Australian dollar-denominated ‘stablecoin’ called TAUD and allocated to Finder Wallet. Customers received Australian dollars back into their accounts when they exited the Finder Earn product. Finder Wallet paid customers (in Australian dollars) an annual compounding return of either 4.01% or, in some circumstances, 6.01%, in exchange for the use of their funds by Finder Wallet.
After ASIC notified Finder Wallet of its concerns, Finder Earn ceased being offered from 24 November 2022 and all funds were returned in full to customers.
On 15 December 2022, ASIC commenced civil penalty proceedings in the Federal Court against Finder Wallet (22-359MR). The proceedings were dismissed on 14 March 2024 (24-045MR).
Entities providing services in relation to crypto-related products should be aware that such products may be financial products. ASIC Information Sheet 225: Crypto Assets provides guidance on the circumstances in which a crypto-related offering may be a financial product.
ASIC has taken recent action to protect investors from harms posed by crypto-asset offerings.
On 9 February 2024, the Federal Court found that Block Earner engaged in unlicensed financial services conduct when offering its crypto-backed Earner product (24-019MR).
On 25 October 2022, ASIC commenced civil penalty proceedings against BPS Financial Pty Ltd regarding allegedly misleading statements made in relation to its crypto-asset Qoin. The trial in this matter was held on 16-19 October 2023 and judgment has been reserved (22-287MR).
In September 2023, fintech company Bobbob Pty Ltd paid penalties of $53,280 to comply with ASIC infringement notices regarding representations it made about a crypto-asset linked investment product (23-261MR).
ASIC’s Moneysmart website has information for consumers about the risks of investing in crypto-assets.
Editor's Note:
The appeal hearing will take place on 22 August 2024.