$104M Crypto Firm Collapse: Australian Watchdog After Two Unlicensed Firms
The companies were allegedly involved in an elaborate scheme that resulted in investors losing A$160 million, worth $104 million.
According to local reports, the Australian Securities and Investments Commission (ASIC) has launched legal proceedings against two crypto companies and their directors for operating without a license in the country.
A company’s involvement in restructuring does not necessarily mean that companies have collapsed. ASIC said it was concerned the funds were at risk of being dissipated and that appointing a receiver was the best way to protect the assets.
While it continues to investigate, ASIC has not called for an outright ban on the companies, but only interim and final injunctions preventing them from operating without a license.
ASIC after Unlicensed Mining Companies
The Australian regulator launched civil proceedings against the NGS group companies and their directors, Brett Mendham, Ryan Brown and Mark Ten Caten. NGS Blockchain crypto mining companies include NGS Crypto, NGS Digital, and NGS Group.
ASIC alleges that NGS companies targeted Australian investors to purchase blockchain mining packages with a fixed rate return. The regulator also accuses the companies of allegedly encouraging investors to use self-managed super funds (SMSF) and convert the money into cryptocurrencies.
According to the NGS Crypto website, the company was formed in 2018 as a blockchain company. As part of the NGS Group, the company “aims to help members generate consistent returns.” The Australian regulator stated in its press release that these financial services are provided without proper licensing. Because of this, ASIC is seeking “provisional and final injunctive relief against the NGS Companies.”
ASIC Chairman Joe Longo urged Australian users to consider the risks involved in self-managing SMSFs before using the funds to invest in cryptocurrency-related investment products, such as those offered by the NGS Group. Additionally, the ASIC president warned the industry about the regulator’s standard for vetting crypto products:
“These procedures should also send a message to the cryptography industry that ASIC will continue to examine products to ensure they meet regulatory obligations to protect consumers.”
The Australian regulator asked the Federal Court to appoint liquidators responsible for the companies’ digital assets. The request was made because the regulator believed the investor’s assets were “at risk of being dissipated.”
On Wednesday, the court approved the request and prevented Mendham from leaving the country. Preliminary investigations revealed that more than 450 Australians invested 62 million Australian dollars, approximately $41 million, through the NGS companies.
Crypto Funds Targeted for Irregularities
Similarly, more than 100 investors are owed more than A$100 million, around $64.6 million, by the now-collapsed DCA Capital, Digital Commodity Assets and the Digital Commodity Assets Fund.
Recently, investigations began after investors exposed crypto funds operated by Ash Balanian, an alleged former NASA mission scientist. As a result, liquidators were appointed for the three companies managed by Balanian.
According to the report, the fund was aimed at wealthy investors and required a minimum deposit of A$50,000. Investors discovered irregularities in the management of the fund, prompting authorities to intervene. Many investors were concerned because they believed the funds did not comply with the required licenses and “failed to comply with the requirements of the managed investment plan.”
On Wednesday, Australia’s Federal Court ordered Balanian’s assets, worth A$55 million, to be frozen and the crypto fund manager to hand over his passport.
By Leonardo Perez