Australian Regulator Goes After Fraudulent ICOs and Crypto Asset Funds Targeting Small Investors

Australian Regulator Goes After Fraudulent ICOs and Crypto Asset Funds Targeting Small Investors

CryptoGlobe Staff Writer
  • The Australian Securities and Investments Commission (ASIC) identified problems with use of misleading statements, operating unregistered investment schemes and operating without an Australian financial services license.
  • ASIC recently prevented five ICOs from raising capital and is taking action on a completed ICO

The Australian Securities and Investments Commission (ASIC) has disclosed its record of regulatory actions against ICOs and crypto asset funds that aim to defraud retail investors by providing them with false information and unrealistic promises, while preventing them from accessing investor protections and guarantees by operating without registering with relevant government bodies.

The body revealed that it recently halted the issue of a Product Disclosure Statement for a managed investment scheme (MIS) based on crypto assets for this reason. According to ASIC, the problems with such investments can be boiled down to three issues which it itemizes as follows:

The use of misleading or deceptive statements in sales and marketing materials; operating an illegal unregistered managed investment scheme (MIS); not holding an Australian financial services licence.

ASIC Commissioner John Price explained that such investments carry significant risks for investors and that the burden of regulatory compliance is on the entity fronting the investment:

If you raise money from the public, you have important legal obligations. It is the legal substance of your offer - not what it is called - that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate.

Recent ASIC Actions

The commission further revealed that since April 2018, it has taken action to prevent five ICOs without proper registration and regulatory compliance from raising capital. According to ASIC, the ICOs have been frozen until such a time as they are able to demonstrate full compliance with all regulatory requirements under Australian financial law.

More recently, ASIC has taken action regarding a completed ICO, and on September 13th, the body issued Investors Exchange Limited a final stop order regarding a Product Disclosure Statement it issued for units in its New Dawn Fund. The fund, which purportedly helped retail investors engage with a number of crypto assets was subjected to the final stop order, preventing any units from being obtained under the existing product disclosure statement.

CryptoGlobe reported earlier in September that according to a recent survey, the number of Australians holding cryptocurrencies tripled during the ongoing crypto bear market. From just over 5 percent a year ago, the percentage of Australia’s population holding cryptocurrencies now stands at 13.5 percent.