By
Chimamanda U. Martha
April 12th, 2024
According to the ASIC, Finder Wallet permanently suspended the product from November 24, 2022, after the regulator notified the company of its concerns.
The Australian Securities and Exchange Commission (ASIC) has submitted an appeal against the Federal Court’s dismissal of its case against Finder Wallet. ASIC was in court claiming that Finder Waller’s Finder Earn crypto product was an unlicensed debenture. An official ASIC release reads:
“ASIC has appealed the Federal Court’s decision to dismiss ASIC’s proceedings against Finder Wallet Pty Ltd for allegedly providing unlicensed financial services, breaching product disclosure requirements and failing to comply with design and distribution obligations in relation to its crypto-asset related product ‘Finder Earn.’”
ASIC Appeal Follows 2022 Lawsuit
In December 2022, the ASIC sued Finder Wallet in Federal Court for several offenses. These include offering customers unlicensed financial products, contravening product disclosure requirements, and non-compliance with design and distribution obligations (DDO) regarding Finder Earn. ASIC alleges that Finder Earn was a debenture because users deposited money expecting repayment with a return for Finder Wallet using their capital. As such, Finder Wallet should have registered the product and obtained the required licensing.
Finder Wallet allegedly offered Finder Earn between February and November 2022. Customers paid in Australian dollars, which Finder Wallet converted to TAUD, a stablecoin pegged to the Australian dollar. The funds were then allocated to Finder Wallet for use as working capital. Depositors received an annual compounding return of 4.01% or 6.01%.
According to the ASIC, Finder Wallet permanently suspended the product from November 24, 2022, after the regulator notified the company of its concerns. Following the suspension, the company refunded all customers in full. Nevertheless, ASIC brought a lawsuit.
On March 14, the Federal Court disagreed that Finder Earn was a debenture and dismissed the case. According to a report from Australian legal advisor Lander & Rogers, the court dismissed the case because there was no deposit with or loan to Finder Wallet. In addition, the court concluded that Finder Wallet did not give an undertaking to repay any deposit as a debt. The ruling states that TAUD was not “money” but personal property given to Finder Wallet for return in the future according to a contractual agreement. ASIC is now appealing this decision to protect customers.
“ASIC has appealed this decision because it is concerned that the Finder Earn product was offered without the appropriate licence or authorisation and therefore without the benefit of important customer protections,” the report reads.
Finder Wallet is a digital currency exchange registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC).
ASIC Crypto Crackdown
The ASIC opened investigations and charges against a few crypto entities last year. In February, it began investigating Binance for wrongful closure of derivatives accounts based on false classification. In April, the regulator revoked the license granted to Binance through Oztures Trading Pty Ltd, a local subsidiary. A press release from the ASIC specified that Binance itself had requested the revocation.
In July, the Commission canceled FTX Australia’s license, especially since the parent body declared bankruptcy in November. Allegedly, the Australian arm did not get a license directly from the ASIC, but through several takeovers instead.