Federal Court Spares Block Earner Fine Over Licensing

As an analyst with extensive experience in the fintech industry and regulatory compliance, I believe that while the ruling in favor of Block Earner may provide some relief for the company, it does not change the fact that they offered an unlicensed crypto yield-bearing product. The good faith argument put forth by the company and its CEO, Charlie Karaboga, is understandable, but ultimately, regulatory compliance is a non-negotiable requirement in this industry.

The Federal Court of Australia granted exemption to fintech company Block Earner from imposing a penalty, even though it was found that the business provided an unlicensed crypto yield product.

On June 4th, it was decided by Justice Ian Jackman that Block Earner had honestly acted. At the time of releasing their “Earner” product, they had explored the option of obtaining a license but ultimately believed, after conducting thorough research and receiving legal counsel, that a license wasn’t necessary.

Before introducing Block Earner to the market, our founder and CEO, Charlie Karaboga, sought legal advice to ensure we were acting ethically and had exhausted all possibilities as a fledgling startup.

I didn’t agree with the outcome being called “fair,” but there was a small consolation – we escaped a financial penalty. Nevertheless, our firm has endured severe reputational harm and incurred substantial legal expenses over the past two years.

Judge Jackman declined ASIC’s proposal for imposing a fine of AUD 350,000 (approximately USD 234,000). Block Earner suggested a penalty equal to three times their earnings from the disputed product, which amounted to AUD 60,000 (approximately USD 40,000).

ASIC, in a press release issued on June 4, indicated that it is reviewing the court’s decision.

Previously in February, Justice Jackman concluded that Block Earner’s “Earner” line of products, which provided returns on loans using USD Coin (USDC), Bitcoin (BTC), Ether (ETH), and PAX Gold (PAXG), necessitated an Australian Financial Services License (AFSL) due to their nature.

The Aave lending protocol’s “DeFi Access” product, which helps users interact with it, was determined not to fall under the category of managed investment schemes. As a result, this product wasn’t subjected to the requirement of having an Australian Financial Services License (AFSL).

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2024-06-04 11:32