The Australian Federal Court has found that fintech firm Block Earner engaged in unlicensed financial services conduct when it offered its crypto-backed Earner product.
From March 2022 to November 2022, Block Earner offered consumers the Earner product that allowed them to earn fixed returns from different crypto assets.
In one of the first rulings on the application of the Financial Services Act to crypto-backed products, the Court today found that Block Earner was providing financial services without a license and operating an unregistered managed investment scheme when offering Earner. This is because the Earner product met the definition of a managed investment scheme and a financial investment facility under the Act.
The Australian Securities and Investments Commission (ASIC), however, failed in its claim that Block Earner’s cryptocurrency-based variable return offering, known in ASIC proceedings as an Access Product, was a financial product. Block Earner markets this product as providing consumers with access to decentralized finance (DeFi) lending protocols.
ASIC considered it to be a financial product as it had the characteristics of a managed investment scheme, investment facility or derivative. The Court did not accept this characterization.
ASIC will now seek orders from the Court to impose monetary penalties. Proceedings are listed for a case management hearing at 9.30am. of March 1, 2024.