Australian Securities and Investments Commission (ASIC) Seeks Crypto Funds and ICO Token Scams

Australian Securities and Investment Commission Further Cracks Down On Crypto Scams

The Australian Securities and Investment Commission (ASIC) has issued a statement indicating it has taken action against “misleading Initial Coin Offerings (ICOs) and crypto-asset funds” which have targeted retail investors. ASIC said it has stopped several ICOs or “token generation events.”

These ICOs have been put on hold and ASIC states that some will be restructured to comply with the applicable legal requirements.

ASIC also recently stopped the issue of a product disclosure statement (PDS) for a crypto-asset managed investment scheme. They were granted new powers in April to take action against prospective ICOs under consumer law where there is evidence of misleading or deceptive conduct.

ASIC listed consistent problems identified pertaining to crypto offerings:

  • the use of misleading or deceptive statements in sales and marketing materials;
  • operating an illegal unregistered managed investment scheme (MIS);
  • not holding an Australian financial services license.

The regulator’s 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.”

Furthermore, the regulator also revealed it blocked ICOs from raising capital in five separate matters since April 2018 due to their lack of investor protection measures. All five ICOs are on hold while some are restructuring to comply with the mandated requirements, the ASIC said.

They added:

“ICOs use the internet to raise money, but they are not the same as crowd-sourced funding which is regulated under Australian law and offers basic investor protections.”

The ASIC paper described ICOs as speculative, high-risk investments and largely experimental.  It said:

“As a result, some projects may take years before they become commercially viable, if at all. A large number of ICOs fail or do not increase in value.”

ASIC commissioner Price assured that the ICO space will be “a key focus” area for the regulator going forward. He stressed that the regulator will keep an “open mind” to new financial innovations but not at the expense of “basic consumer protection” policies.

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