ASIC Sues Crypto-Asset Firm over Alleged Unlicensed Conduct

ASIC commenced civil penalty proceedings in late 2022 against Finder Wallet Pty Ltd (“Finder Wallet”), a subsidiary of website Finder.com. ASIC alleges that Finder Wallet provided unlicensed financial services, breached product disclosure requirements and failed to comply with Design and Distribution Obligations in relation to its crypto-asset related product, Finder Earn.

Alleged Offence

ASIC alleges that Finder Earn is a financial product and that Finder Wallet breached the financial services law by offering Finder Earn to customers between February and November 2022 without holding an Australian Financial Services Licence. The Finder Earn product allowed customers to deposit Australian dollars into their Finder Earn accounts, which were converted to an Australian dollar-denominated ‘stablecoin’ called TAUD and allocated to Finder Wallet to use for its own working capital. Finder Wallet then paid customers an annual compounding return of either 4.01% or 6.01%.

ASIC argues that the Finder Earn product was a debenture, and therefore Finder Wallet was providing financial product advice or dealing in a financial product without the necessary AFSL. ASIC alleges that in doing so Finder Wallet exposed consumers to potential harm and that it had an obligation to comply with the disclosure and Design and Distribution Obligations. ASIC Deputy Chair Sarah Court stated

issuers of financial products such as debentures must issue appropriate risk disclosure documents and develop appropriate target market determinations to ensure consumers are not sold inappropriate products. Finder Wallet failed to do this, potentially putting their customers at risk of harm’.

This latest case comes as a warning to the offerors of crypto-asset related products. ASIC’s stance is that offers or products that involve a crypto-asset related products do not necessarily fall outside the licensing regime. All entities that provide services in relation to crypto-related products should be aware that these products may constitute financial products and should seek the appropriate advice prior to making any offer to the public. ASIC Information Sheet 225: Crypto Assets outlines the circumstances in which a crypto-related offering may be considered a financial product.

Background

Finder Wallet is a Digital Currency Exchange provider registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC).  

This is ASIC’s third recent action against a firm offering a crypto-asset related product that is considered a financial product. ASIC has also commenced civil penalty proceedings against Block Earner and BPS Financial Pty Ltd.

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