Australian regulator sues fintech company over alleged unlicensed crypto services

Australia’s financial regulator has sued Sydney-based Block Earner, citing concerns that the fintech company offered unlicensed crypto products.

Block Earner offers several tiers of products that offer yield on crypto holdings. The Australian Securities and Investment Commission, or ASIC, claims these products are unregistered managed investment schemes that should have been licensed. 

ASIC opened up a civil penalty file with the federal court seeking “declarations, injunctions, and pecuniary penalties,” according to a statement released by the regulator. The court has yet to schedule the first hearing date. 

“We are concerned that Block Earner offered financial products without appropriate registration or an Australian Financial Services license, leaving consumers without important protections,” ASIC Deputy Chair Sarah Court said in the statement. “Simply because a product hinges on a crypto-asset, does not mean it falls outside financial services law.”

Block Earner had launched its seed funding round in 2021 and secured $4.5 million, from investors including Aave CEO Stani Kulechov and Coinbase Ventures. The platform lends out client assets through Aave and Compound protocols.

The firm’s executive told Business News Australia that the civil penalty file is “disappointing”. 

“We welcome regulation in our space and have spent considerable resources building regulatory infrastructure to be able to deliver a whole suite of services to Australian users in a regulated and compliant manner under existing guidelines provided by ASIC,” CEO Charlie Karaboga said.

“As a case in point, for our upcoming products where the licensing requirements are clear, we have already filed for an application for an Australian Credit License and advised ASIC of our intention to apply for an AFSL,” he added.

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