The Australian financial regulator has sued fintech company Block Earner over the alleged provision of unlicensed crypto-asset-based products, and the operation of an unregistered managed investment scheme.
Block Earner, founded last year, offers a wide range of fixed-yield earning products based on crypto holdings. It is backed by crypto assets, including stablecoin USD coin.
Details on The Lawsuit
According to The Australian Securities and Investment Commission (ASIC) the products which Block Earners provides are considered unregistered managed investment schemes that should have been licensed. Sarah Court, a Deputy Chair from ASIC, said the unlicensed products Block Earner offers exposes customers to a financial service without protections.
“We are concerned that Block Earner offered financial products without appropriate registration or an Australian Financial Services license, leaving consumers without important protections. Simply because a product hinges on a crypto-asset does not mean it falls outside financial services law,” said Sarah in a statement.
ASIC revealed it has opened up a civil penalty file with the federal court to seek declarations, injunctions, and pecuniary penalties from court. Per the statement, the court is yet to declare a date for the first case management hearing.
Block Earner’s Response to The Lawsuit
In a statement by Business News Australia, Block Earner co-founder and CEO Charlie Karaboga discussed the lawsuit asserting that it’s disappointing.
Karaboga stated, “Although we understand the backdrop, this is a disappointing outcome. We welcome regulation in our space and have spent considerable resources building regulatory infrastructure to be able to deliver a whole suite of services to Australian users in a regulated and compliant manner under existing guidelines provided by ASIC.”
Karaboga further mentioned that though “lack of clarity around regulation in Australia for cryptocurrency-related products creates friction between regulators and innovators,” however, in the future, the company will look forward to “working with ASIC and other regulators in the space to make Australia an innovative space for the crypto industry.”
“As a case in point, for our upcoming products where the licensing requirements are clear, we have already filed for an application for an Australian Credit License and advised ASIC of our intention to apply for an AFSL,” Karaboga concluded.
Notably, Block Earner is a blockchain-powered fintech company that is backed by Frame Work ventures, crypto exchange Coinbase, DeFi Alliance, Synthetix founder Kain Warwick, AAVE founder Stani Kulechov, and developer of Avalanche blockchain protocol Emin Gün Sirer.
The firm recently closed a $6.4 million seed funding round with the aim to export finance services and attach them to blockchain-based solutions.