Lawyers for Fred Schebesta’s Finder.com have laid out why the comparison website’s now-defunct crypto savings product was not caught by existing laws, arguing digital assets count as property rather than money.
The corporate regulator sued a subsidiary of Finder.com last year, alleging the comparison website provided unlawful financial advice and put customers at risk by offering its Finder Earn product without a proper licence.
Fred Schebesta, executive chair of the comparison website Finder. James Brickwood
The lawsuit is one of three the Australian Securities and Investments Commission has brought against local crypto businesses experimenting with new product types built using blockchain technology.
Sydney-based Block Earner and Gold Coast-based BPS Financial are also defending the release of their crypto-based products against similar litigation from ASIC.
The trio of cases will test the regulator’s power to oversee crypto products, mirroring a lawsuit from the US Securities and Exchange Commission against the listed token exchange Coinbase.
Finder, which is currently seeking fresh funding, argues it did not need a financial services licence to offer its Finder Earn product, which paid out investors a “guaranteed” 4 per cent interest rate in return for deposits.
ASIC argues the product was a debenture, which is a long-term security that yields a fixed interest rate and is often used by companies to borrow money.
But Finder disagrees, noting that ASIC itself has maintained its overarching position is that digital assets are property rather than money. ASIC says the process by which Finder Earn operates interacts with fiat currency.
“Although cryptocurrencies share features in common with money in that they can be stores of value and are fungible, they are not money, they are property,” Finder’s lawyers told Justice Bridgette Markovic in the Federal Court last Wednesday.
“This is important because a fundamental part of a debenture is the depositing or lending of money.”
Finder Earn customers deposited Australian dollars into a Finder Wallet, which was then converted to a stablecoin called TrueAUD, which the company said was backed by Australian dollars.
The Finder Earn product was shuttered before the lawsuit began, but it was marketed across morning television shows and in slick digital campaigns targeting young “savers”.
Its launch was the result of an explosion of interest in decentralised finance, or DeFi, where investors were often paid high-interest rates to “lock up” their capital in various systems that mimic banking functions.
These products contributed to the crypto market crash in 2022, when the companies took the customer deposits and lost them in risky trades designed to generate the “guaranteed” interests.
In the absence of any new federal legislation, ASIC has cracked down on crypto businesses using existing financial markets regulation over the past 12 months.
Although Finder is licensed to provide financial services as a representative of Centra Wealth, a disclaimer on the Finder website explained that its Earn product was not offered under that or any other licence.
Regulators brought a similar action against Block Earner, which also offered a high-yield crypto-based product, for allegedly offering unlicensed financial services.
ASIC sued Gold Coast-based BPS Financial over a crypto product known as Qoin in October, alleging unlicensed conduct and the misleading promotion of crypto asset.
The judgment for ASIC’s case against Finder Wallet is expected in the coming months. Mr Schebesta stepped down as Finder chief executive last December but remains executive chair.
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