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Recently, Australian investors faced significant losses totaling over 160 million Australian dollars ($104 million) due to the liquidation of three cryptocurrency mining companies: NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd, collectively known as “NGS companies.”
On April 12, a report revealed that the Australian Securities and Investments Commission (ASIC) took legal action against the NGS companies and their directors, Brett Mendham, Ryan Brown, and Mark Ten Caten. The companies are accused of enticing local investors to set up self-managed superannuation funds (SMSFs) and invest in blockchain mining packages, promising fixed-rate returns.
The ASIC claims that around 450 investors invested approximately 62 million AUD ($40 million) in these firms, which operated without the necessary Australian financial license. The commission raised concerns about the risks associated with blockchain mining investments and successfully obtained a Federal Court order to appoint liquidators to manage the digital assets held by the NGS companies. Additionally, a travel ban was imposed on Mendham.
ASIC has also taken steps to prevent NGS companies from providing illegal financial services in Australia. ASIC Chair Joe Longo cautioned Australians about the risks of investing SMSFs in cryptocurrencies and reiterated the commission’s commitment to monitoring crypto offerings for compliance with regulations to protect investors.
Meanwhile, other Australian cryptocurrency organizations such as DCA Capital, Digital Commodity Assets Pty Ltd, and the Digital Commodity Assets Fund are also facing liquidation and federal court actions due to investor concerns about mismanagement, lack of licensing, and possible violations of investment scheme regulations.
KordaMentha, the liquidator, reported debts of 100 million AUD ($65 million) owed by these firms to 100 investors. The Federal Court has frozen assets worth 55 million AUD ($36 million) belonging to Ashod Balanian, the director of DCA Capital, and ordered him to surrender his passport.
Additionally, in response to recent legal developments, ASIC is appealing a Federal Court decision concerning Finder Wallet Pty Ltd, a subsidiary of the digital currency exchange Finder.com. The court previously dismissed ASIC’s civil penalty lawsuit against Finder Wallet for operating without an Australian Financial Services license and breaching regulatory obligations.
Justice Brigitte Markovic ruled that the Finder Earn product did not qualify as a debenture under the Corporations Act, leading to the lawsuit’s dismissal. In response, Finder Wallet has defended its product in court, stating that the initial ruling was based on a thorough examination of the evidence, which will remain unchanged in the appeal.
This appeal is part of ASIC’s strategy to pursue riskier litigation cases to ensure regulatory compliance in the cryptocurrency sector. It underscores the importance of due diligence and regulatory adherence in the volatile world of cryptocurrency investments.
