An Australian Federal Court Determines Block Earner Engaged in Unlicensed Financial Services Conduct
An Australian federal court has found that fintech company Block Earner violated financial services regulations by offering its crypto-backed Earner product without a license. The court’s ruling distinguishes between crypto-yield products that require a financial services license and decentralized-finance (DeFi) “pass-through” products that may not.
Australian Federal Court Imposes Penalties on ‘Earner’ Offering
In a ruling issued on February 9, the court addressed Block Earner’s offerings and imposed penalties specifically on its “Earner” product. The court did not apply the penalties to its DeFi “Access” product. The court determined that the “Earner” product constituted an unregistered managed investment scheme and required an Australian Financial Services License (AFSL). This ruling is significant as it is one of the first decisions regarding the application of financial services law to crypto-backed products.
Australian Court Rules on ASIC’s Case Against Block Earner’s Crypto Products
The case was brought forward by the Australian Securities and Investment Commission (ASIC) and alleged violations of corporation laws by both Block Earner’s Access and Earner products. The court differentiated between the two products, with Access functioning as a pass-through to DeFi and Earner involving representations of users’ crypto yielding returns. The court accepted that the Access product provides access to decentralized finance (DeFi) lending protocols.
ASIC will now seek pecuniary penalties against Block Earner, with proceedings scheduled for March 1, 2024. This decision highlights the importance for firms offering crypto-backed products to carefully assess their regulatory obligations and ensure compliance.
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