The Australian Securities & Investments Commission (ASIC) is suing digital asset trading firm Finder Wallet for offering an unlicensed financial product to consumers.
Finder Wallet offered its ‘Finder Earn’ service to customers between February and 10 November 2022. Users of the service could deposit Australian dollars into their accounts to be converted into ‘stablecoin’ TAUD. Finder Wallet could then use the coin for its own working capital.
In return for the investment, Finder Wallet paid customers an annual compounding interest of either 4.01 per cent or 6.01 per cent. All interest was paid back to investors in Australian dollars. An ASIC statement explains that the product offering should technically be classified as a debenture. As such, Finder Wallet should have acquired the relevant licenses before offering the service.
Sarah Court, deputy chair at ASIC, outlined the need for companies to acquire licenses to ensure customer safety. Court explained: “Issuers of financial products such as debentures must issue appropriate risk disclosure documents and develop appropriate target market determinations to ensure that consumers are not sold inappropriate products. We allege that Finder Wallet failed to do this, potentially putting their customers at risk of harm.”
Finder Wallet stopped offering the product and returned all customer funds on November 24 after ASIC made it aware of its concerns about the product. Despite these actions, ASIC looks to continue civil penalty proceedings against the company.
Court also issued a warning to crypto firms in light of the news. She said: “This is ASIC’s third recent action against a firm offering a crypto-asset-related product that we consider a financial product. Our message to the industry is clear. Just because an offer involves a crypto-asset-related product does not guarantee it will fall outside the current regulatory regime.”
Crackdown on cryto firms
ASIC’s move represents the third time in under three months that it has sued a company under similar circumstances.
October 2022 saw ASIC take action against BPS Financial, accusing the fintech of making “false, misleading or deceptive” claims when marketing its crypto-asset token ‘Qoin‘. The Qoin Facility said it was “compliant with financial services laws” despite engaging in unlicensed conduct. The regulator also took issue with it being marketed that users could exchange the token on independent exchanges, despite the fact this was not possible for “periods of time”.
November 2022 saw also ASIC begin further proceedings to sue fintech company Block Earner. The company offered a range of fixed-yield earning products based on crypto-assets. The products were named ‘USD Earner‘, ‘Gold Earner‘ and ‘Crypto Earner‘ (collectively, the ‘Earner Products‘).
Because of the nature of the products, ASIC argued they should have been licensed. It explained the products were a “managed investment scheme” which requires licensing.
The actions taken by the regulator appear to send a warning to fintech and crypto firms offering investment products. The increased rate of the regulator stepping in highlights how Australia continues to crack down on crypto firms. The news also comes after the FTX scandal, indicating the potential for more scrutiny in the crypto world.