Australia’s federal court has granted fintech company Block Earner an exemption from paying a fine, despite the court’s discovery that it had offered a cryptocurrency yield-bearing product without the necessary financial services license.
On June 4, Justice Ian Jackman delivered a ruling stating that Block Earner had “acted honestly.” When Block Earner launched its yield-bearing “Earner” product, the company had considered obtaining a license. However, after conducting research and seeking legal advice, it was determined that a license was not required.
Charlie Karaboga, the founder and CEO of Block Earner, informed Cointelegraph that obtaining legal advice before the product launch demonstrated the company’s honesty and thorough preparation as a startup.
In a statement, Block Earner expressed relief that the court’s decision not only absolved the company of financial penalties but also recognized the damage to its reputation caused by inaccurate statements made by ASIC in a press release following the court’s initial ruling on liability.
The court directed ASIC to cover Block Earner’s legal costs incurred after February 9, the day Justice Jackman determined that Block Earner’s “Earner” products, which offered yields on loans in USD Coin (USDC), Bitcoin (BTC), Ether (ETH), and PAX Gold (PAXG), required an Australian Financial Services License (AFSL).
Justice Jackman concurred with Block Earner’s argument that an ASIC press release from that day was “misleading and unfair,” as it stated that Block Earner’s product “needed” an AFSL, even though the product had been unavailable since November 2022.
ASIC’s request for a fine of $234,000 (350,000 Australian dollars) was rejected by Justice Jackman. Block Earner had proposed a penalty of $40,000 (60,000 Australian dollars) — three times the amount earned from the product in question that led to the lawsuit.
ASIC announced in a press release on June 4 that it is reviewing the court’s decision.
In a ruling in February, Justice Jackman determined that Block Earner’s “DeFi Access” product, which facilitates the use of the lending protocol Aave, did not fall under a managed investment scheme and therefore did not require an AFSL.
ASIC filed a lawsuit against Block Earner in November 2022, alleging that both the Earner and DeFi Access products were managed investment schemes requiring a license, as they pooled investor funds to purchase assets.
The Earner product was operational from March 17 to November 16 of that year, after which Block Earner ceased its operations prior to the court proceedings.
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Additional reporting by Felix Ng.