Australia’s federal court has granted fintech company Block Earner exemption from paying a fine, despite finding that it offered a crypto yield-bearing product without a financial services license.
Justice Ian Jackman made the ruling on June 4, stating that Block Earner had “acted honestly.” When the company launched its yield-bearing “Earner” product, it had considered obtaining a license, but after conducting research and seeking legal advice, it was determined that one was not necessary.
According to Block Earner’s founder and CEO Charlie Karaboga, seeking legal advice before the product launch demonstrated their honesty and diligence as a startup.
The court noted that Block Earner had attempted to obtain legal advice, as confirmed by the Federal Court of Australia. In a statement, Block Earner expressed relief at not facing a financial penalty and highlighted the reputational damage caused by inaccurate statements made by ASIC in a previous press release.
ASIC was ordered to cover Block Earner’s costs incurred after Justice Jackman’s ruling that the “Earner” products required an Australian Financial Services License. These products offered yield on loans in USD Coin (USDC), Bitcoin (BTC), Ether (ETH), and PAX Gold (PAXG).
Justice Jackman criticized ASIC for a misleading press release, in which the regulatory body claimed that Block Earner’s product “needs” an AFSL, even though it had ceased operations before the ruling.
ASIC had initially sought a fine of $234,000 (350,000 Australian dollars), but Block Earner proposed a penalty of $40,000 (60,000 Australian dollars) – three times the earnings from the product in question.
ASIC stated in a press release on June 4 that it is reviewing the court’s decision.
In a previous ruling by Justice Jackman in February, Block Earner’s “DeFi Access” product, which enables the use of the Aave lending protocol, was found not to operate under a managed investment scheme, thus not requiring an AFSL.
ASIC had filed a lawsuit against Block Earner in November 2022, alleging that both the Earner and DeFi Access products were managed investment schemes. The Earner product was active from March 17 to November 16 of that year, before being discontinued prior to the court proceedings.
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Additional reporting by Felix Ng.