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Regulators Investigating Collapsed Crypto Firm That Owes Creditors $58,000,000 After Going Bust in 2021: Report

Regulators Investigating Collapsed Crypto Firm That Owes Creditors ,000,000 After Going Bust in 2021: Report

Australian securities regulators are investigating Blockchain Global after a report connected two of its directors to previous crypto schemes. The Australian Securities and Investment Commission (ASIC) is investigating Blockchain Global directors Sam Lee and Ryan Xu after a newspaper investigation linked the two to another crypto scheme called Hyperverse, according to a report. Asic began investigating […]

The post Regulators Investigating Collapsed Crypto Firm That Owes Creditors $58,000,000 After Going Bust in 2021: Report appeared first on The Daily Hodl.

U.S. Justice Department Indicts Russian National Over Alleged Crypto Market Manipulation and Fraud

Block Earner sued over crypto-yield products, CEO calls for clarity

Block Earner CEO Charlie Karaboga said it was a “disappointing outcome” given it had spent “considerable resources” to adhere to existing guidelines.

The CEO of fintech firm Block Earner has lashed out over the “lack of clarity” in Australia’s financial licensing regime after his company was sued by the country’s financial services regulator for providing unlicensed crypto-based investment products.

The Australian Securities and Investment Commission (ASIC) announced on Nov. 23 local time that it started civil legal proceedings against the company because it offered three crypto-linked fixed-yield earning products without an Australian Financial Services (AFS) license.

ASIC stated that the products should have been licensed as they were “managed investment schemes” where investors contribute money that is pooled together for an interest in the scheme.

The products, named “Crypto Earner”, “USD Earner” and “Gold Earner,” offered yields through users depositing Australian dollars that would be converted to Bitcoin (BTC), Ether (ETH), USD Coin (USDC) or PAX Gold (PAXG) depending on the product according to Block Earner’s website.

The crypto-assets are then lent to borrowers on Decentralized Finance (DeFi) protocols Aave (AAVE) and Compound Finance (COMP) to generate yield for the product.

ASIC Deputy Chair Sarah Court aired her concern that Block Earner offered the products without “appropriate registration” or an AFS license that she claimed left “consumers without important protections,” adding:

“Simply because a product hinges on a crypto-asset, does not mean it falls outside financial services law.”

In an emailed statement to Cointelegraph Block Earner CEO and co-founder, Charlie Karaboga, said although the firm “[understands] the backdrop” it was a “disappointing outcome.”

He said it welcomes regulations, claiming the firm “spent considerable resources building regulatory infrastructure” to be able to offer services “under existing guidelines provided by ASIC.”

Related: FTX Australia’s license suspended as 30K Aussies left in the lurch

Karaboga took aim at the unclear regulatory environment for crypto in the country and said the “lack of clarity [...] creates friction between regulators and innovators,” adding:

“In an ideal world, we would build these products in a regulatory sandbox with more clarity around licensing regimes. In the future, we look forward to working with ASIC and other regulators in this space.”

According to Karaboga, Block Earner had filed for a credit license and advised ASIC it would apply for an AFS license for its upcoming products as “the licensing requirements are clear.”

ASIC has previously given a warning to crypto-asset providers in the country after it took action against the creators of the Qoin token.

It said its “key priority” is targeting “unlicensed conduct and misleading promotion of crypto-asset financial products” after it alleged the Qoin token creators were “misleading” its users.

U.S. Justice Department Indicts Russian National Over Alleged Crypto Market Manipulation and Fraud

ASIC’s Longo pledges action against certain ‘high-risk’ crypto products

The chair of Australia’s market regulator has warned that “action will be taken” on financial product issuers who promote risky products to a wide consumer base.

Australia’s financial services and markets regulator has issued another glaring warning towards issuers of crypto-based financial products, particularly those inappropriately marketing high-risk products.

Joe Longo, chair of the Australian Securities and Investment Commission (ASIC) in an opening speech at the ASIC annual forum on Nov. 3 local time said it will use current laws to police “risky and complex products” to protect consumers.

He added, “crypto and the crypto ecosystem continue to pose challenges and opportunities for regulators and policymakers alike” saying the risks with crypto investing are “often opaque” with the assets being “highly volatile, inherently risky, and complex.”

While his warning encompassed non-crypto-focused firms too, Longo took particular aim at issuers of crypto-based financial products, putting them on notice if their offering doesn’t pass ASICs muster:

“Too often, issuers are seeking to market high-risk and niche investment products, including in some cases crypto-based products, to a very wide range of consumers.

 We’re seeing issuers promoting high-risk products as appropriate investments that will make up a significant portion of an individual consumer’s investment portfolio. This will not be tolerated and action will be taken," he warned.

Longo said ASIC is continuing to use rules enacted in Oct. 2021 for financial products to have stricter target market determinations (TMDs) and disclosures of significant dealings outside of those TMDs to police “risky, volatile, and complex products.”

ASIC recently used these powers on Oct. 17, halting three cryptocurrency-related funds set to be offered to retail investors, due to non-compliant TMDs saying to Cointelegraph that they were “too broad [...] given the volatility and speculative nature of crypto markets.”

Longo took a seemingly softer approach towards blockchain and asset tokenization technology, noting it as having the potential to “provide new solutions to longstanding problems” and “revolutionize the way we do commerce.”

He noted the regulators' work supporting the pilot of a local Central Bank Digital Currency (CBDC) saying ASIC is monitoring developments of the pilot and how it will respond and adapt, adding:

“While encouraging digital innovation, ASIC will act to disrupt and deter conduct that harms people. Harmful conduct that falls within our jurisdiction, including unlicensed conduct and misleading promotion of crypto-asset financial products, is within our sights.”

Related: Saying ‘not financial advice’ won’t keep you out of jail: Crypto lawyers

At a panel on cryptocurrency later in the day, Longo said crypto “the capacity for consumer and investor harm is really, really significant” when trading digital assets and reiterated the difference between crypto and blockchain technology:

“My central message for consumers is that this is a risky, speculative, and poorly understood activity, which has to be distinguished from the innovation of the underlying technology.”

Longo said that crypto brings together “key issues that ASIC is interested in: technology, innovation, and new challenges for regulation.”

He spoke on the three “cornerstones” of ASICs crypto regulation strategy which are supporting the development of a regulatory framework and greater legal clarity for crypto and gathering information from international peers to inform the government on an effective legal framework along with continuing to disrupt and deter scams involving crypto.

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Three Aussie crypto funds halted as regulator cites non-compliance

Three funds tracking Bitcoin, Ethereum, and FileCoin have been issued interim stop orders by Australia’s market regulator due to "non-compliant" target market determinations.

Australia’s chief financial market regulator has placed interim stop orders on three cryptocurrency-related funds set to be offered to retail investors, due to non-compliant target market determinations (TMDs).

In a media release dated Oct. 17 local time, the Australian Securities and Investments Commission (ASIC) said it has placed interim stop orders on three of Australian asset manager Holon's crypto funds — which separately aim to invest in Bitcoin (BTC), Ethereum (ETH), and FileCoin (FIL).

A target market determination is a document that describes who a product is appropriate for, based on likely needs, objectives, and financial situation as well as how the product can be distributed, according to Invest Smart.

In a statement to Cointelegraph, a spokesperson from ASIC said the TMDs were “too broad [...] given the volatility and speculative nature of crypto markets.”

They added the regulator's concern that Holon has “not appropriately considered the features and risks of the funds in determining their target markets.”

In its statement, ASIC said it considers the funds not suited to the wide target market defined in the TMDs, including those with a “medium, high, or very high risk and return profile,” those intending to use the fund as a “satellite component” — up to 25% of their portfolio, and those who intend to use the fund for 75% to 100% of their investment portfolio.

ASIC added that cryptocurrency funds could see investors exposed to significant negative returns but stated the product disclosure statements (PDS) provided by Holon say they could face a “total loss of value.”

“ASIC made the interim orders to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs,” it said, adding that the order would be valid for 21 days unless revoked earlier.

The specifics of what ASIC has requested Holon to change are unclear and the ASIC spokesperson did not provide further details, however, the regulator said it expects Holon to consider the concerns and take immediate steps to ensure compliance.

The interim stop will prevent Holon from sharing a PDS, providing general advice on the funds, or issuing shares of the funds to retail investors.

The regulator also expects Holon to address the concerns “within a timely manner” otherwise a final stop order will be issued, though Holon will be given the opportunity to make submissions before such an order is made.

A spokesperson from Holon told Cointelegraph the company is not making comments on the matter “at this stage.”

Related: 1M Aussies will enter crypto over the next 12 months — Swyftx survey

The funds, named the Holon Bitcoin Fund, Holon Ethereum Fund, and Holon FileCoin Fund are all managed investment schemes that aim to give exposure to the price of the corresponding crypto and work by investors pooling money who in return receive a relative stake in the scheme.

In this case, the pooled money is used to purchase the digital asset named in the fund with custody handled by the Gemini crypto exchange according to a July blog from the company.

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