The Australian Federal Court recently ruled in favor of the Australian Securities and Investments Commission (ASIC) in a case involving an unlicensed crypto platform that misled customers. BPS Financial, a Gold Coast crypto promoter, was found to have broken the law by promoting an unlicensed crypto wallet called the ‘Qoin Wallet’. The firm misled customers by offering a non-cash payment facility using a crypto-asset token called ‘Qoin’. ASIC Chair Joe Longo emphasized the importance of authorized licenses in the crypto industry and stated that ASIC has been taking enforcement actions against unlicensed crypto businesses.
Justice Downes found that BPS Financial breached the Corporations Act by not holding an Australian Financial Services license and misleading customers with false representations about the Qoin Wallet. Qoin was launched in Australia in early 2020 with promises of multi-fold returns for investors. However, concerns were raised by business owners about the future of the digital currency, with allegations of misinformation and difficulties in cashing out. The ASIC launched court action against BPS Financial alleging that advertisements promoting Qoin misled consumers by giving them a false impression of the product’s compliance with financial services laws.
Over 79,000 individuals and entities who bought Qoin may have believed that the product was compliant with financial services laws. However, the ASIC alleged in 2022 that this was not the case and lodged civil penalty proceedings in the Federal Court against BPS Financial. This case is significant for the ASIC as it is the first time they have taken court proceedings alleging that a crypto asset offering, such as the Qoin facility, is a financial product being offered. Deputy chair Sarah Court highlighted the importance of ensuring that crypto businesses have the appropriate licenses and provide clear and accurate information to investors.
The court’s ruling in favor of ASIC sets a precedent for the regulation of the crypto industry in Australia. The case highlights the importance of ensuring that crypto businesses comply with financial services laws and have the necessary licenses to operate. It also serves as a warning to other unlicensed crypto platforms that ASIC is actively monitoring and enforcing regulations in the industry. The decision reinforces the need for transparency and accountability in the crypto sector to protect consumers and prevent misleading advertising practices.
The outcome of this case raises questions about the regulation of crypto assets and the need for stricter oversight of the industry. As cryptocurrencies become more mainstream, regulators are increasingly focusing on ensuring that investors are protected and that businesses operate within the bounds of the law. The ASIC’s actions against BPS Financial demonstrate their commitment to enforcing regulations in the crypto sector and holding businesses accountable for misleading practices. Moving forward, it is likely that regulators will continue to scrutinize the crypto industry to prevent fraudulent activities and safeguard investors.
