ASIC Rebuked for ‘Misleading’ Statement, Ordered to Pay Costs as Block Earner Wins Key Ruling

There was a win for Australian crypto bros yesterday as the Federal Court of Australia rebuked the nation’s financial regulator, the Australian Securities and Investments Commission (ASIC), for publishing a misleading press release that mischaracterised the February ruling in its case against the crypto startup, Block Earner. 

The court also ordered ASIC to pay part of Block Earner’s legal costs and opted not to impose a penalty on the crypto startup, saying it had acted honestly and tried to engage with the government.

Related: Breaking: ASIC Wins Lawsuit Over Crypto Startup Block Earner 

Press Release Deemed Unfair and Misleading

ASIC’s press release followed the court’s February 9 ruling as to whether Block Earner had acted illegally by offering products and services without holding the necessary financial services licences. In its ruling the court found that Block Earner had indeed broken the law by offering its yield generating Earner product without a financial services licence, but its Access product didn’t require a licence and was offered legally.

Yesterday, Judge Ian McNeil Jackman upheld Block Earner’s allegation that ASIC’s press release about the ruling was “unfair and misleading”, despite it mentioning that the Access product was not offered illegally.

Jackson said the publication of the release meant that ASIC had failed to stay in compliance with a federal court rule (37N(4)) about conducting proceedings ‘according to law; and as quickly, inexpensively and efficiently as possible.’ 

He said the media release did not “facilitate the just resolution of the dispute”. “Nor is that conduct efficient, given the propensity of misleading public statements to generate their own complaints and claims,” Jackson added. 

Block Earner Relieved Of Penalty, ASIC Ordered To Pay Costs

Judge Jackman also decided that Block Earner should be relieved of having to pay any financial penalty in the case because it had acted honestly and sought to engage with the government around the regulation of its Earner product.

Given the regulator’s failure to comply with the conduct rule, ASIC was also ordered to pay the legal costs incurred by Block Earner after the court’s February 9 judgement.

Related: ASIC Sues Aussie Fintech Company Block Earner Alleging Unlicensed Services 

In a statement to CoinDesk about this case, Blockchain Australia Chair, Michael Bacina, suggested that this case demonstrates that seeking legal advice and working closely with regulators may partially protect crypto projects from legal penalties should things go wrong:

Obtaining legal advice in an emerging area like crypto will support an argument for relief from a penalty…Crypto projects which charge ahead without seeking proper legal advice not only risk their products infringing the law, but also remove a potential argument for relief of a penalty in the event an innovative product in an area of unclear guidance end up being found to be infringing.

Michael Bacina, Blockchain Australia Chair