Australian Federal Court Drops Fine Against Fintech Firm Block Earner Over Licensing Case
Summary:
An Australian federal court has ruled that fintech firm Block Earner will not pay a fine despite offering its crypto yield-bearing product, 'Earner', without a financial services license. The court acknowledged the firm's honesty and the steps it took to consider licensing. Despite escaping a financial penalty, the company's CEO cited the case's impact on their reputation and the cost of legal fees. The Australian Securities and Investments Commission is currently reviewing the decision.
In a recent development, the federal court in Australia has decided to exempt Block Earner, a fintech organization, from paying a penalty despite acknowledging that the firm provided a cryptocurrency yield-bearing product without possessing a requisite financial services license. Judge Ian Jackman, on June 4, recognized Block Earner’s honesty in its operations, particularly when launching its yield-bearing 'Earner' product. The company had considered licensing but based on legal advice and research, it deduced it wasn't mandatory.
Charlie Karaboga, founder and CEO of Block Earner, communicated to Cointelegraph that their decision to seek legal counsel prior to the product launch demonstrated their transparency and thoroughness as a startup. Although the court credited Block Earner for pursuing legal advice, Karaboga abstained from describing the judgement as fair. Instead, he illustrated that the only positive aspect was the avoidance of a financial penalty.
Despite this, Karaboga mentioned the company's reputational harm due to the case and significant expenditure on legal fees. Judge Jackman dismissed the Australian Securities and Investments Commission's proposal of a fine of AUD 350,000 ($234,000). Block Earner suggested an alternative penalty of AUD 60,000 ($40,000), triple the return from the product that led to lawsuit.
The Australian Securities and Investments Commission confirmed its review of the decision in its press release dated June 4. Previous to this, in February, Judge Jackman declared that Block Earner’s 'Earner' products introduced in 2022, which generate interest on USDC, BTC, ETH and PAXG loans, required an Australian Financial Services License. However, no license was needed for the 'DeFi Access' product, which accommodates the use of the Aave lending protocol, as it wasn’t under a managed investment scheme.
In late 2022, Block Earner faced a lawsuit from ASIC which claimed that both the Earner and DeFi Access products should have been licensed as managed investment schemes gathering and utilizing investor funds to purchase assets. This came after Block Earner ceased the Earner product, which operated from March 17 to November 16 of that year, before the court case commenced.
Published At
6/4/2024 8:33:14 AM
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