Doing their blockie: ASIC is having another crack at crypto fintech Block Earner

Corporate regulator the Australian Securities and Investment Commission (ASIC) is hoping it’s a case of third time lucky is its legal battle with cryptocurrency platform Block Earner, and will seek special leave from the High Court to appeal last month’s Full Federal Court decision to dismiss their case.

ASIC is seeking a High Court’s ruling on what falls within the definition of financial product and clarify when interest-earning products and products involving a conversion of assets from one form into another are regulated.

Back in 2023, ASIC took legal action against Web3 Ventures, the company behind Block Earner, arguing that the digital currency exchange needed a financial services licence to offer its fixed-yield digital asset-related product, Earner.

In February 2024, the Federal Court ruled that Earner was an issue and the business engaged it unlicenced financial services conduct, but subsequently dismissed another allegation by ASIC over Block Earner’s Access product. The court also relieved Block Earner from liability to pay a penalty for offering the Earner product.

ASIC decided to appeal the penalty waiver and Block Earner cross-appealed the decision that it needed an Australian financial services licence licence (AFSL) to offer Earner.

Last month the Full Federal Court overturned the original decision, dismissing ASIC’s submissions that Earner was a financial product that needed to be regulated.

Block Earner cofounder and CEO Charlie Karaboga said at the time that “We acted honestly and in good faith. From the outset, we sought to ensure that our modern product suite could fit into a less-modern regulatory environment”.

The fintech voluntarily closed the Earner product in November 2022 and the duo said they have no intention to reintroduce it following the Federal Court decision.

ASIC said in announcing plans to appeal that definition of financial product was drafted in a broad and technology-neutral way, and the regulator believes it is in the public interest to clarify this.

“This clarification is important as it applies to all financial products and services whether they involve crypto-assets or not,” ASIC said in a statement announcing it’s seeking special leave.

A date for ASIC’s application has yet to be determined.

The move follow’s a similar loss for ASIC involving the Finder crypto wallet, Earn. ASIC sued Finder Wallet for alleged ‘unlicensed conduct’ over Earn in 2023 just weeks after Finder announced it was shutting down its fixed return stablecoin product. It a similar argument, the regulator’s case alleged that Finder Wallet was  a financial services business without an AFSL, but the Federal Court dismissed the claim, with costs awarded against the regulator.