Australia’s financial watchdog sues Coinbase-backed Block Earner over unlicensed digital asset services

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The Australian Securities and Investment Commission (ASIC) has taken Block Earner to court over its alleged unregistered offering of digital asset products to the public.

Block Earner, a firm backed by Coinbase (NASDAQ: COIN) and Aave, also operates an unregistered managed investment scheme that violates Australia’s capital market laws, the regulator said. ASIC averred before the court that the USD Earner, Gold Earner, and Crypto Earner were financial products managed under an investment scheme that required the approval of the regulator.

“We are concerned that Block Earner offered financial products without appropriate registration or an Australian Financial Services license, leaving consumers without important protections,” ASIC Deputy Chair Sarah Court said in a statement. “Simply because a product hinges on a crypto-asset, does not mean it falls outside financial services law,” she added.

The securities watchdog is pursuing civil penalty proceedings against the fintech company “seeking declarations, injunctions, and pecuniary penalties from the court.”

Block Earner described the suit as “disappointing” but stated that it understands the stance of the regulator. The company reiterated that it had taken necessary measures to prevent the loss of clients’ funds, like in the FTX collapse, while assuring that funds could be withdrawn anytime.

“Although we understand the backdrop, this is a disappointing outcome,” said Charlie Karaboga, the firm’s CEO. “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.”

Block Earner was founded in 2021 and received backing from Coinbase and Aave. The company says its goal is to change the face of financial markets by using distributed ledger technology (DLT) solutions.

Securities watchdogs are stepping up to the plate

Around the world, securities regulators are leading the charge in reining in the digital assets industry. In the United States, the Securities and Exchange Commission (SEC) has adopted an active stance by expanding its digital assets monitoring team and dragging bad actors to court for violating rules.

Thailand’s SEC took the big leap to ban virtual asset service providers from offering staking and lending services following the implosion of some exchanges after Terra’s debacle. The agency has been in court with the largest digital asset exchange Bitkub for perceived irregularities.

In Singapore, the securities watchdog has ordered service providers to limit their advertising to only official channels and provide all pertinent details relating to all advertisements.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.