An Australian federal court ruled that fintech company Block Earner engaged in unlicensed financial services conduct when offering its crypto-backed “Earner” product between March 2022 and November 2022.
Operating under the trading name Web3 Ventures, Block Earner allowed consumers to earn fixed-yield returns from different crypto assets. However, the company did not hold an Australian financial services license, according to ASIC.
ASIC Deputy Chair Sarah Court stated this was an important decision, clarifying that crypto-backed products meeting the definition of a managed investment scheme or financial investment facility require licensing under the law.
The regulator said Block Earner operated an unregistered managed investment scheme and provided unlicensed financial services, deemed a financial product, through its Earner product.
The court added that cryptoassets are inherently risky and complex, and ASIC remains concerned about inadequate consumer protections. Firms must ensure appropriate licensing before distributing crypto-based financial products.
However, ASIC was unsuccessful in alleging Block Earner’s separate ‘Access’ product for earning yields into the same boat. Jackson explained that it didn’t operate under a managed investment scheme and, therefore, no AFSL was required.
“The Court’s decision carries nuanced implications for Block Earner and the broader crypto industry in Australia,” Block Earner stated. “The decision provides guidance to the industry as to the applicability of Australian financial services laws to crypto-related products and services.”
ASIC now intends to seek monetary penalties from the court. The proceedings are scheduled for a case management hearing on March 1st, 2024.