Finder Wins in Australia: Court Rules Crypto Product Wasn’t a Security

In a landmark decision with significant ramifications for the Australian crypto industry, a court has ruled in favour of Finder Wallet in a lawsuit brought by the country’s financial watchdog, the Australian Securities and Investment Commission (ASIC).

The lawsuit, filed in December 2022, centred around Finder’s Earn product, a program that offered consumers returns on their cryptocurrency holdings. ASIC argued that Finder Earn functioned similarly to a debenture – a debt security – and therefore required a financial services license, which Finder didn’t possess. The regulator also accused Finder of failing to adequately disclose potential risks associated with the product.

However, on Thursday, the court dismissed the case entirely. The judge’s verdict hinged on the classification of Finder Earn. ASIC argued it constituted a debenture, bringing it under the purview of traditional securities regulations.

The court, however, disagreed, ruling that ASIC “has not established that the Finder Earn product is a debenture within the meaning of a s 9 of the Corporations Act.” This key distinction implies that Finder Earn doesn’t fall under existing securities regulations, potentially paving the way for clearer regulations for innovative crypto products in the future. The court also ordered ASIC to cover the defendant’s costs.

Finder celebrated the verdict as a victory for the Australian crypto space. CEO Frank Restuccia expressed his delight in a blog post, stating: “We are delighted with this outcome, which confirms that Finder was compliant with our regulatory obligations in offering Finder Earn to our customers.” He added that the company had proactively chosen to discontinue the Earn product in November 2022 and had fully refunded all customer funds.

While Finder emerged victorious, ASIC remains undeterred. In a statement, Tim Mullaly, the regulator’s enforcement and compliance director, explained that ASIC pursued the case due to concerns that “this product was being offered without the appropriate license or authorization and therefore without the benefit of important consumer protections.” The regulator intends to “consider the judgment carefully” and has the option to appeal the decision within 28 days.

The outcome of this case has significant implications for the Australian crypto landscape. A Finder win could pave the way for clearer regulations for innovative crypto products that may not fit neatly into existing financial categories.

This could foster a more welcoming environment for crypto businesses to operate and encourage further innovation within the Australian crypto space. However, if ASIC appeals and prevails, stricter licensing requirements could be imposed on similar offerings in the future, potentially stifling innovation and hindering the growth of the Australian crypto industry.

The coming weeks will be crucial as ASIC weighs its options. Regardless of the regulator’s next move, this landmark case sets a precedent for future interactions between Australian regulators and crypto companies. It highlights the ongoing challenge of adapting traditional financial regulations to the ever-evolving world of cryptocurrency.