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ASIC Pursues Legal Action Against Crypto Firms After $160 Million Investor Loss

The Australian Securities and Investments Commission (ASIC) has initiated civil proceedings against three cryptocurrency mining companies, collectively known as “NGS companies,” following the liquidation that resulted in over 160 million Australian dollars ($104 million) in losses for hundreds of Australian investors.

ASIC has brought charges against NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd, along with their directors Brett Mendham, Ryan Brown, and Mark Ten Caten. These companies are accused of enticing investors to establish self-managed superannuation funds (SMSFs) and invest in blockchain mining packages, promising fixed-rate returns.

Approximately 450 investors entrusted around 62 million AUD ($40 million) to these firms, which operated without the necessary Australian financial license. ASIC’s concerns about the risk of losing digital assets involved in blockchain mining prompted them to obtain a Federal Court order appointing liquidators to manage the digital currencies held by the NGS companies. Additionally, a travel ban was imposed on Mendham.

ASIC has taken swift action to prevent NGS companies from illegally providing financial services in Australia, emphasizing their commitment to monitoring crypto offerings to ensure compliance with regulations and safeguard investors.

In addition to the NGS companies, other Australian cryptocurrency organizations, including DCA Capital, Digital Commodity Assets Pty Ltd, and the Digital Commodity Assets Fund, are undergoing liquidation and facing federal court actions. Investor concerns about mismanagement, inadequate licensing, and potential violations of managed investment scheme regulations have prompted these proceedings.

The liquidator, KordaMentha, has discovered debts of 100 million AUD ($65 million) owed by these firms to 100 investors. The Federal Court has also frozen assets worth 55 million AUD ($36 million) belonging to Ashod Balanian, the director of DCA Capital, and ordered him to surrender his passport.

Meanwhile, ASIC is appealing a Federal Court decision regarding Finder Wallet Pty Ltd, a subsidiary of the digital currency exchange Finder.com. ASIC’s civil penalty lawsuit against Finder Wallet was dismissed by the court, which ruled that the Finder Earn product offered by the company did not qualify as a debenture under the Corporations Act.

In response to the appeal, Finder Wallet stated its active involvement in proposing regulations and consistent engagement with ASIC. The firm defended its product vigorously in court and reiterated its commitment to innovation while respecting ASIC’s regulatory role.

This appeal reflects ASIC’s strategy to pursue riskier litigation cases to ensure strict regulatory compliance in the cryptocurrency sector, even if it entails facing potential losses.

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