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Regulator Drops Penalty in Crypto Yield Case Against Block Earner
Jun. 04, 2024. 2 min. read.
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Australia's federal court ruled that Block Earner won't pay a fine for offering a crypto yield product without a license, citing the company's honest actions and initial legal advice.
Australia’s federal court has spared fintech firm Block Earner from paying a fine, even though it found the company offered a crypto yield-bearing product without a financial services license.
Justice Ian Jackman ruled on June 4 that Block Earner “acted honestly.” At the time its yield-bearing “Earner” product launched, Block Earner did consider getting licensed but concluded, based on research and legal advice, that it didn’t need one.
Block Earner founder and CEO Charlie Karaboga told Cointelegraph that obtaining a legal opinion before launching the product “showed that we acted honestly and did everything that we could do as a startup.”
The court acknowledged that Block Earner tried to obtain legal advice. Justice Jackman rejected the Australian Securities and Investments Commission’s (ASIC) request for a $234,000 (350,000 Australian dollars) fine. Block Earner had proposed a $40,000 (60,000 Australian dollars) penalty, which is three times the amount earned from the product in question.
Karaboga refrained from calling it a “fair ruling,” explaining that the only “silver lining” was avoiding a penalty. He noted that the firm still suffered “reputational damage” and has “lost a lot of money” on legal fees over the past two years.
ASIC stated in a June 4 press release that it is reviewing the decision.
In February, Justice Jackman ruled that Block Earner’s “Earner” products offered in 2022, which provided yield on loans in USD Coin (USDC), Bitcoin (BTC), Ether (ETH), and PAX Gold (PAXG), required an Australian Financial Services License (AFSL).
The company’s “DeFi Access” product, which facilitates the use of the lending protocol Aave, escaped punishment. The court found it didn’t operate under a managed investment scheme, so no AFSL was needed.
ASIC sued Block Earner in November 2022, alleging both the Earner and DeFi Access products needed a license as they were managed investment schemes—when a fund pools investor money and uses it to buy assets.
The Earner product operated from March 17, 2022, to November 16, 2022, ending before court proceedings began.
SOURCE: Block Earner spared penalty in regulator’s crypto yield suit
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