ASIC loses crypto case against Finder

ASIC argued that the product was more accurately an “obligation” and therefore a financial product, requiring a financial services license or authorization for distribution.

Judge Brigitte Markovic on Thursday dismissed ASIC's case and ordered the corporate watchdog to pay Finder's legal costs.

"ASIC has not established that the Finder Earn product is an obligation," Judge Markovic wrote in his ruling.

"As each of the Corporations Act breaches alleged by ASIC is based on establishing that the Finder Earn product is a liability, those breaches cannot be distinguished."

The end of Finder Earn

Judge Markovic concluded that no money was deposited or lent to Finder Wallet and that Finder Wallet did not undertake to repay any money as a debt.

“Banks accept customer deposits primarily as a way to raise capital. That is not the purpose of a transfer of funds by a customer to a Finder Wallet account,” she wrote.

"While at that time the customer may be an unsecured creditor of Finder Wallet for the balance in his account, the purpose for which the money is paid into the Finder Wallet account is to allow the customer to use the services of Finder Wallet already either by investing in a particular cryptocurrency or… by investing in the Finder Earn product.

“Rather, there was a contractual promise to return to the client the TrueAUD allocated by the client to Finder Wallet along with the return earned on that allocation during the Earning Term, which was also paid in TrueAUD,” he wrote.

Finder said it will not reintroduce Earn to the market despite the court victory. Higher interest rates have made products with yields of around 4 percent uncompetitive, a spokesman said.

ASIC said in a statement that it will consider the ruling and said it has 28 days to lodge an appeal request.

"ASIC pursued this matter because we considered that this product was being offered without the appropriate license or authorization and therefore without the benefit of important consumer protections," ASIC executive director of enforcement and compliance Tim Mullaly said.

Clyde Digital Asset Lawyer Liam Hennessy & Co, said the decision illustrates that there are ways to issue new cryptocurrency-based products under existing financial laws.

"But it is taking some time to analyze all the computer software related to these products," Hennessy said.

“Obligations are niche products and it seems like Finder did everything I needed. “It must have been very difficult for them to get the product off the market for so long.”

Finder Global CEO Frank Restuccia said the decision tested the legal definition of obligation in relation to cryptocurrencies.

"We are delighted with this result, which confirms that Finder has met our regulatory obligations in offering Finder Earn to our customers," it said in a statement.

“We understand and respect the importance of good regulation to protect consumers and we engaged openly and proactively with ASIC from the beginning.”

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