Regulator says company was offering a crypto-related asset without proper licence
The Australian Securities and Investments Commission has announced that it has initiated Federal Court proceedings against Finder Wallet, a subsidiary of comparison website Finder.com.
ASIC alleged that Finder Wallet provided unlicensed financial services, breached product disclosure requirements and failed to comply with design and distribution obligations (DDO) related to its crypto asset-related product, Finder Earn.
“This is ASIC’s third recent action against a firm offering a crypto asset-related product that we consider to be a financial product,” said Sarah Court, ASIC deputy chair. “Our message to the industry is clear – just because an offer involves a crypto asset-related product does not guarantee it will fall outside the current regulatory regime.”
Finder Wallet offered the Finder Earn product between late February and Nov. 10 of this year. Finder Earn customers deposited Australian dollars into their accounts. That money was then converted to an Australian dollar-denominated “stablecoin” called TAUD and allocated to Finder Wallet to use for its own working capital, ASIC alleged. Finder Wallet paid customers an annual compounding return of either 4.01% or 6.01%, in Australian dollars, in exchange for the use of their funds.
ASIC alleges that the product was essentially a debenture, because customers deposited money with Finder Wallet with the understanding that it would ultimately be repaid, along with a return for allowing the company to use their capital.
The regulator also said that Finder Wallet required an Australian financial services licence to offer the Finder Earn product because it was providing financial product advice or dealing in a financial product. ASIC argued that offering the Finder Earn product without a licence exposed customers to potential harm.
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Court said that because Finder Earn appeared to be a financial product, Finder Wallet was required to comply with disclosure and DDO obligations.
“Issuers of financial products such as debentures must issue appropriate risk disclosure documents and develop appropriate target determinations to ensure that consumers are not sold inappropriate products,” Court said. “We allege that Finder Wallet failed to do this, potentially putting their customers at risk of harm.”
ASIC said that after it notified Finder Wallet of its concerns, the company stopped offering the Finder Earn product and returned all funds to customers. The regulator is seeking declarations and pecuniary penalties from the Federal Court.
This is the latest Federal Court action by ASIC. In October, ANZ was hit with $236 million in penalties as the result of a Federal Court action by the regulator. The same month, ASIC sued Harvey Norman and Latitude Finance over allegedly misleading advertising.
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