ASIC, Investments

ASIC cracks whip on crypto-assets

The Australian Securities and Investments Commission (ASIC) has moved to act against misleading initial coin offerings and crypto-asset funds targeting retail investors.

The corporate regulator has taken action to stop several proposed initial coin offerings or token-generation events – together, ICOs – while also recently stopping the issue of a product disclosure statement (PDS) for a crypto-asset managed investment scheme.

ASIC identified consistent problems, including 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.

It warned ICOs are very speculative investments that are mostly unregulated and said while genuine businesses using this structure do exist, many have turned out to be scams.

ASIC commissioner John Price said: “If you raise money from the public, you have important legal obligations.

“It is the legal substance of your offer – not what it is called – that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate.”

ASIC has acted to prevent ICOs raising capital without appropriate investor protections in five other separate matters since April 2018. The ICOs have been put on hold and some will be restructured to comply with the relevant legal requirements.

The regulator is also taking further action against one completed ICO.

“On 13 September 2018, ASIC issued a final stop order on a product disclosure statement issued by Investors Exchange Limited (IEL) for units in the New Dawn Fund,” ASIC said.

“The fund was proposing to invest in a range of cryptocurrency assets. Following ASIC raising concerns about the PDS, IEL consented to a final stop order so that no units could be obtained under the PDS. ASIC acknowledges the cooperative approach taken by IEL in responding to ASIC’s concerns.”

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