ASIC crypto blitz continues as regulator takes on Finder

ASIC crypto blitz continues as regulator takes on Finder

Photo: Screenshot from Finder's website.

The corporate watchdog's blitz against against crypto companies rages on after the Australian Securities and Investments Commission (ASIC) launched civil penalty proceedings against Finder Wallet, a subsidiary of comparison website Finder.com which was founded by Fred Schebesta, Frank Restuccia and Jeremy Cabral.

ASIC alleges Finder Wallet provided unlicensed financial services, breached product disclosure requirements, and failed to comply with design and distribution obligations (DDO) in relation to its crypto-asset related product Finder Earn.

The action in the Federal Court follows the regulator's recent moves against other companies in the crypto space such as Block Earner and BPS Financial, a group affiliated with the crypto-asset token Qoin.

"This is ASIC’s third recent action against a firm offering a crypto-asset related product that we consider to be a financial product," says ASIC Deputy Chair Sarah Court.

"Our message to industry is clear - just because an offer involves a crypto-asset related product does not guarantee it will fall outside the current regulatory regime."

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 to use for its own working capital.

Finder Wallet paid customers - in Australian dollars - an annual compounding return of either 4.01 per cent or, in some circumstances, 6.01 per cent, in exchange for the use of their funds by Finder Wallet.

ASIC alleges that the Finder Earn product was, in substance, a debenture. This is because customers deposited money with Finder Wallet on the understanding that their money would ultimately be repaid, together with a return for allowing Finder Wallet to use their capital.

In response, a spokesperson for Finder has taken issue with ASIC's definition of the Finder Earn product - an offering that was withdrawn on 24 November after the watchdog raised its concerns.

"We do not share ASIC’s view that Finder Earn can be regarded as a debenture. Since Finder Earn was launched in November 2021, we have proactively engaged with ASIC and have cooperated fully with all ASIC requests for information," the Finder spokesperson said.

"An innovative product, Finder Earn offered customers a way to earn yield on their crypto. 

"All customers’ capital was returned in full and the product was sunset last month."

ASIC also alleges that Finder Wallet required an Australian financial services licence to offer Finder Earn, because it was providing financial product advice or dealing in a financial product.

The regulator alleges that offering Finder Earn without a licence exposed consumers to potential harm, including the possibility that they were offered a product that was not suitable for them.

ASIC Deputy Chair Sarah Court said that because Finder Earn 'appeared to be a financial product', Finder Wallet had a requirement to comply with disclosure and DDO obligations to protect consumers.

"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," she said.

"We allege that Finder Wallet failed to do this, potentially putting their customers at risk of harm."

ASIC is seeking declarations and pecuniary penalties from the Court.

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Business success comes from thinking inside the box for TAXIBOX founder
Partner Content
On a first glance, the world of storage solutions might not seem particularly exciting ...
TAXIBOX
Advertisement

Related Stories

60,000 Australian crypto accounts in limbo across two exchanges in administration

60,000 Australian crypto accounts in limbo across two exchanges in administration

As the crypto crunch continues to take its toll on companies in the...

DigitalX sees crypto assets plunge 27pc in one month

DigitalX sees crypto assets plunge 27pc in one month

Perth-based blockchain technology and investment firm DigitalX (ASX...

ASIC sues Block Earner, alleges fintech provided unlicensed financial services

ASIC sues Block Earner, alleges fintech provided unlicensed financial services

Sydney-based Block Earner has been hit with civil penalty proceedin...

ASIC takes BPS Financial to court over Qoin crypto

ASIC takes BPS Financial to court over Qoin crypto

Purveyors of a crypto-asset founded on the Gold Coast have bee...