ASIC “Very Concerned” about Crypto Fraud, Makes Move Against Miners

ASIC “Very Concerned” about Crypto Fraud, Makes Move Against Miners
  • Joe Longo, ASIC chair, warns of high-risk crypto activities and potential fraud while asserting ASIC’s role in market regulation.
  • ASIC has taken legal action against NGS companies for unlicensed financial services, reflecting ongoing regulatory efforts.
  • Despite crypto’s partial regulation, Longo emphasises the need for comprehensive law reform to address digital assets.

Australian Securities and Investment Commission (ASIC) chair Joe Longo is ‘very concerned’ about high-risk activity and the next big fraud event in crypto.

Speaking to Sky News over the weekend, Mr. Longo said:

There’s a high-risk speculative activity. It’s an activity that’s often associated with money laundering and with assisting crime and it’s an activity that for many investors or consumers it’s not entirely clear what they’re investing in.

Joe Longo, ASIC Chair

Related: ASIC Commissioner Unveils Strategy To Tackle Blockchain’s Regulatory Trilemma

He added ASIC will continue to monitor market activity and has currently a number of pending matters, and that if ASIC believes something is ‘a financial product or service’ the watchdog will act.  

Asked if he was worried about the number of investors putting their money into crypto, Longo said he believes in choice and that people are free to invest in what they like.

Everyone has a view about crypto. People have strong views about whether they should invest in it or not. That’s a matter for them.

Joe Longo, ASIC Chair

The ASIC chair stated it’s his job to ‘administer the law’, meaning if people are not complying with existing laws, his agency will step in.

Some people still believe crypto is unregulated, he added, saying that this is not true and crypto is at least partially regulated.

People think that crypto is not regulated. It is regulated. It may not be completely regulated, which is why we’ve got law reform coming.

Joe Longo, ASIC Chair

Longo also said ASIC was working with the treasury and government on improving regulation as the Corporations Act doesn’t address digital assets specifically.

ASIC Takes Action Against Miners

Last Friday, ASIC filed legal proceedings against NGS companies – NGS Crypto, NGS Digital, and NGS Group – for allegedly illegally offering financial services.

NGS Companies are alleged by ASIC to have encouraged around 450 Australian investors to transfer approximately US$41 million from regulated superannuation funds to self-managed super funds (SMSFs) and to invest these funds in blockchain mining packages, converting them into cryptocurrency.

ASIC’s allegations further state that the ‘NGS Companies contravened section 911A of the Corporations Act by providing financial services without holding an Australian Financial Services Licence’.

Longo commented:

Our allegation is that they weren’t licensed to do so and we’re now concerned [about] the assets or activities in which the investors have put their money. We’re concerned about what’s happened to that money. And so, the purpose of the appointment of receivers is to task them to see what’s there. We’re at a very early stage of our investigation. So that’s why we did it. To protect investors.

Joe Longo, ASIC Chair

ASIC recently lost a lawsuit against Finder.com.au for offering a service which allowed Australians to earn TrueAUD, a stablecoin which ASIC alleged to be a debenture.

A debenture is a medium-term financial instrument where investors lend money to a company in exchange for fixed interest payments until maturity, when the principal is repaid. These investments are typically secured by physical assets and can be issued for a specific term or callable.

ASIC said Finder didn’t have a licence to issue debentures – however the judge in this case didn’t agree with the regulator about the definition. ASIC has said it will appeal the decision, Mr Longo stated ASIC wants to send a strong message to the industry about working with assets they may deem unregulated:

We think it’s a debenture and the trial judge took a different view and reasonable minds can differ. But we feel as the regulator that it is a debenture and if it is it’s regulated. They didn’t have a licence and we want to send a strong message to industry that they need to be very careful about how they promote or package up some crypto or digital asset related investments and think they’re not regulated because they may very well be.

Joe Longo, ASIC Chair

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