Australia’s securities watchdog sues ASX over alleged ‘misleading’ claims on paused blockchain project

Australia’s securities regulator, ASIC, has filed a lawsuit against the Australian Stock Exchange (ASX). ASIC has accused it of making misleading claims about a blockchain project. The lawsuit alleges that ASX misled the public regarding the progress of its software upgrade. Through this upgrade, ASX was intended to replace the exchange’s old clearing and settlement systems with a new blockchain-based platform.

ASIC alleges that ASX, which processes trades worth roughly A$5 billion ($3 billion) per day, breached the law when it gave an update in February 2022 indicating that the project was set for a 2023 launch. First unveiled in 2017, the project was deemed as one of the largest attempts to apply blockchain technology in global trading.

However, the upgrade proved less successful, and it was eventually discontinued in November 2022. ASIC stated that ASX had been informed by its software developer for several months that the project was late. By the end of 2021, ASX had categorized the status of the project as “red” which demonstrated potential threats to delivering the project on time.

The action explains that due to ASX’s statements that were developed without reference to accreditation, investors lost trust in the reliability of the information provided by the participants in the Australian financial markets. ASIC accused ASX of underperforming on the high standards that it sets in corporate governance for ASX and the companies listed with it.

ASX Faces Potential Penalties as CEO Reviews Lawsuit Claims

ASX CEO Helen Lofthouse, who joined the company in August 2022 welcomed the allegations but quickly clarified that the firm is in the process of assessing the claims by the investors. The ASX has already written off A$250 million ($166 million) in costs related to the failed project. In addition to this step, it has removed former CEO Dominic Stevens from a long-term bonus payment worth about A$3 million.

In keeping with the above scenario, it can be concluded that the outcome of the lawsuit could lead to significant penalties for ASX and further scrutiny of its handling of the blockchain project.