Purveyors of a crypto-asset founded on the Gold Coast have been taken to the Federal Court by the country's consumer watchdog, which has alleged BPS Financial made false, misleading or deceptive representations of Qoin.
Qoin was the brainchild of Raj Pathak while he was general manager at Gold Coast trade exchange business Bartercard, which he acquired and privatised alongside his crypto co-founder-to-be Tony Weise in 2018, and now goes by the name BPS Financial.
In 2020 the pair launched the crypto-asset token Qoin, and now around two years later the company's website claims the digital currency is used by almost 38,000 merchants, with a valuation that has soared from $0.18 to $10.80 per token.
However, Qoin is not traded on decentralised exchanges but rather the Block Trade Exchange (BTX), which has a $125 per day sell limit per person.
BTX, BPS Financial and Qoin are all owned by Pathak and Weise, and are registered entities in the Gold Coast suburb of Bundall.
The Australian Securities and Investments Commission (ASIC) claims increasingly restrictive limits were imposed on exchanging Qoin tokens for Australian dollars on the BTX Exchange over time. There is also a class action lawsuit underway led by Salerno Law since November 2021, with plans to seek $100 million in damages from BPS.
Meanwhile, ASIC is alleging BPS engaged in unlicensed conduct in relation to the crypto.
"We allege that, despite what BPS represented in its marketing, Qoin merchant numbers have been declining, and that there have been periods of time where it was not possible to exchange Qoin tokens through independent exchanges," ASIC Deputy Chair Sarah Court said.
"ASIC is particularly concerned about the alleged misrepresentation that the Qoin facility is regulated in Australia, as we believe the more than 79,000 individuals and entities who have been issued with the Qoin facility may have believed that it was compliant with financial services laws, when ASIC considers it was not.
"Where it falls within our remit, ASIC will take targeted action against unlicensed conduct and misleading promotion of crypto-asset financial products that could harm consumers - this is a key priority for ASIC."
Court emphasised crypto-assets were highly volatile, inherently risky, and complex.
"Every crypto-asset is different, often making it difficult to compare with each other - or anything else. This makes it crucially important that investors are provided with honest and accurate information," she said.
In a response, BPS said it would review and defend the allegations.
"ASIC alleges that BPS has been engaging in unlicensed conduct in relation to a non-cash payment facility involving the Qoin crypto asset and, flowing from that alleged unlicensed position, BPS has consequently made false or misleading representations," the company said in a statement.
"BPS does not agree with ASIC’s position and, confident of its position, will be defending the matter.
"Before it started, BPS consulted with ASIC in late 2019 regarding the structure of the Qoin project and did so again in early 2021."
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