ASIC cracks down on cryptocurrency promoters Media Man Int

ASIC cracks down on cryptocurrency promoters - 20th September 2018

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ASIC is cracking down on cryptocurrency offers.

By John Collett

The Australian Securities and Investments Commission has stopped promoters of initial coin offerings and funds that invest in crypto-assets from raising money from retail investors.

In a toughening of its stance on risky investments, the regulator has taken a series of actions to stop several proposed initial coin offerings (ICO), or token-generation events, that were pitched at retail investors.

ASIC has previously warned that most ICOs are unregulated, and while there are genuine businesses using this structure, many have turned out to be scams.

There is a certainly a growing army of crypto-enthusiasts - mostly young and tech-savvy who swear they have made a lot of money.

But experienced investment professionals have pointed out that just as "currency" is a misnomer that gives crypto "tokens" a gravitas they are yet to earn, so is the term "initial coin offering", which is not analogous to "initial public offerings" - the listing of a company on the sharemarket.

While crypto-tokens, like the leading token, Bitcoin, have had spectacular gains when valued in real currencies like US dollars, it has also had big falls - with high levels of intra-day volatility.

Last week, Ether, the second-largest virtual currency, fell 5.2 per cent to $US172.41, extending this month's retreat to 39 per cent. The value of all virtual currencies tracked by CoinMarketCap.com sank to $US187 billion, a 10-month low.

There have also been security issues, with crypto exchanges hacked regularly around the world.

As part of its enforcement actions, ASIC recently stopped the issue of a product disclosure statement for a crypto-asset managed investment scheme issued by Investors Exchange Limited for units in the New Dawn Fund. The fund was proposing to invest in a range of cryptocurrency assets.

Following ASIC's concerns, Investors Exchange Limited agreed to a final stop order so that no money could be raised.

ASIC says problems identified with ICOs and funds that invest in crypto-assets include the use of misleading or deceptive statements in sales and marketing materials, operating an illegal, unregistered managed investment scheme and not holding an Australian financial services licence.

John Price, an ASIC commissioner, said those raising money from the public have important legal obligations.

He said promoters should not simply assume that using an ICO structure allows them to ignore key protections or the investing public and that disclosures about the offer needs to be complete and accurate.

(The Sydney Morning Herald)