Australia's markets regulator is suing Block Earner, alleging the fintech company provided unlicensed financial services.
The Australian Securities and Investments Commission (ASIC) said Block Earner offered a range of fixed-yield earning products based on crypto assets, according to a statement from the commission Wednesday. The products should have been licensed because they are a managed investment scheme, leaving "consumers without important protections," it said.
“Although we understand the backdrop, this is a disappointing outcome," said Block Earner co-founder and CEO Charlie Karaboga in a statement to Business News Australia. Karaboga said since inception, customers' funds have been protected against events like the recent collapse of crypto exchange FTX and that a lack of regulatory clarity "creates friction between regulators and innovators." The company, which has backing from crypto exchange Coinbase, didn't immediately respond to a request for comment from CoinDesk.
The case isn't the first time ASIC has targeted the crypto industry. Last month, it sued BPS Financial, the company behind the qoin digital token, for running misleading ads.
"Simply because a product hinges on a crypto asset, does not mean it falls outside financial services law," ASIC Deputy Chair Sarah Court said in the statement. The regulator is seeking declarations, injunctions and pecuniary penalties. A hearing has not yet been scheduled.
Michael Bacina, a partner at law firm Piper Alderman, said the alarm around such financial products had already been sounded in the past few months. “Crypto products offering a percentage return are on a high risk of being seen to be a financial investment or managed investment scheme, even if they are structured as a loan arrangement,” he said.
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