ASIC sets sights on crypto companies following 160 million investor loss

A significant number of Australian investors have suffered losses exceeding 160 million Australian dollars ($104 million) due to the closure of three cryptocurrency mining companies: NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd, collectively known as the “NGS companies.”
On April 12, a report disclosed that the Australian Securities and Investments Commission (ASIC) had initiated legal proceedings against the NGS companies and their directors, Brett Mendham, Ryan Brown, and Mark Ten Caten.
These companies are accused of luring local investors to establish self-managed superannuation funds (SMSFs) and invest in blockchain mining packages with promises of guaranteed returns.
ASIC alleges that approximately 450 investors entrusted around 62 million AUD ($40 million) to these firms, which operated without the necessary Australian financial license.
The commission expressed concerns about the potential loss of digital assets in blockchain mining and successfully obtained a Federal Court order to appoint liquidators to oversee the digital currencies held by the NGS companies. Additionally, a travel ban was imposed on Mendham.
Furthermore, ASIC has taken steps to prevent NGS companies from offering unauthorized financial services in Australia.
ASIC Chair Joe Longo cautioned Australians about the risks associated with investing SMSFs in cryptocurrencies and reiterated the commission’s commitment to monitoring crypto offerings to ensure compliance with regulations and safeguarding investors.
Meanwhile, other Australian cryptocurrency entities, such as DCA Capital, Digital Commodity Assets Pty Ltd, and the Digital Commodity Assets Fund, are facing liquidation and federal court actions.
Concerns among investors regarding mismanagement, lack of proper licensing, and potential violations of managed investment scheme regulations have prompted these legal actions.
The liquidator, KordaMentha, disclosed debts totaling 100 million AUD ($65 million) owed by these companies to 100 investors. The Federal Court has frozen assets worth 55 million AUD ($36 million) belonging to Ashod Balanian, the director of DCA Capital, and ordered him to surrender his passport.
In light of recent legal developments involving the NGS companies, ASIC is also challenging a Federal Court ruling concerning Finder Wallet Pty Ltd. The court previously dismissed ASIC’s lawsuit against Finder Wallet, a subsidiary of the digital currency exchange Finder.com.
Finder Wallet, which operated from late February to November 10, 2022, offered an investment product called Finder Earn. ASIC had accused the company of operating without an Australian Financial Services license and breaching regulatory obligations.
On March 14, 2024, Justice Brigitte Markovic ruled that the Finder Earn product did not meet the criteria of a debenture under the Corporations Act, resulting in the dismissal of the lawsuit.
In response to the appeal, a spokesperson for Finder Wallet informed Crypto.news that the company had been actively engaged in proposing regulations and had maintained consistent communication with ASIC throughout the process.
Finder Wallet vigorously defended its product in court, emphasizing that the initial ruling was based on a thorough examination of all evidence, which will remain unchanged in the appeal.
The company also expressed respect for ASIC’s challenging position and reiterated its commitment to constructive dialogue. Furthermore, it emphasized its dedication to innovation, stating that its product was designed with the best interests of its customers in mind.
This appeal is part of ASIC’s new strategy to pursue more challenging litigation cases, even at the risk of potential losses, to ensure strict regulatory compliance in the complex cryptocurrency industry.