The regulatory body accused Finder Wallet, a subsidiary, of offering financial services without the necessary license
The corporate regulator faced a significant legal defeat when a judge determined that comparison website Finder did not provide an unlicensed financial service through its crypto exchange.
Finder successfully defended itself against a lawsuit filed by the Australian Securities and Investments Commission regarding its Finder Earn product.
The regulatory body accused Finder Wallet, a subsidiary, of offering financial services without the necessary license.
Because customers transferring money to Finder Wallet to buy crypto currency TrueAUD later received a “deposit” when getting their funds back, this meant the Finder Earn product was a debenture, ASIC contended.
A debenture is a financial instrument based on a company’s debt repayment promise along with interest.
It is illegal to offer this product without the appropriate financial services license.
Finder Wallet contested the allegations in the Federal Court, claiming that ASIC misunderstood the functionality of its product.
The company clarified that it did not commit to repaying debts to customers through a deposit.
Instead, customers acquired TrueAUD, and the legal ownership of the crypto currency was then transferred to Finder Wallet.
The customer then had a right to get back the amount of TrueAUD they had bought plus an additional amount at the end of a stated earnings period, the company said.
Justice Brigitte Markovic agreed with the company, dismissing the lawsuit and instructing ASIC to cover Finder Wallet’s legal fees.
It is not a deposit with or loan of moneys to Finder Wallet but, as specified in the terms, the transfer or loan of the TrueAUD, an asset, the legal title to which is held by Finder Wallet for the duration of the earn term, the judge wrote.
There was no legally binding promise by the firm to repay a “debt” to those who purchased the TrueAUD currency, Justice Markovic said.
Rather, there was a contractual promise to return to the customer the TrueAUD allocated, together with the return earned on that allocation over the earn term, which was also paid in TrueAUD, Justice Markovic said.
Finder’s global CEO Frank Restuccia expressed satisfaction with the ruling.
We are delighted with this outcome, which confirms that Finder was compliant with our regulatory obligations in offering Finder Earn to our customers, he said.
He added: We understand and respect the importance of good regulation to protect consumers and we engaged openly and proactively with the Australian Securities and Investments Commission from the outset.
ASIC stated that it would review the judgment and had 28 days to file an appeal if desired.
ASIC pursued this matter because we considered that this product was being offered without the appropriate licence or authorisation and therefore without the benefit of important consumer protections, ASIC executive director of enforcement and compliance Tim Mullaly said.
The Finder Earn product was terminated in November 2022, with the company announcing the return of all customer funds along with an additional yield totalling approximately $500,000.