Three Companies Accused of Operating Without License in Australia
Published at 17 Apr 2024
Three interconnected companies are facing allegations of conducting operations without proper authorization under Australia’s Corporations Act.
The Australian Securities and Investments Commission (ASIC) recently took legal action against three blockchain mining entities – NGS Crypto, NGS Digital, and NGS Group – along with their respective directors, Brett Mendham, Ryan Brown, and Mark Ten Caten. ASIC’s actions follow concerns regarding the companies’ non-compliance with financial regulations and their solicitation of Australian investors. The regulator alleges that the NGS entities promoted blockchain mining packages offering fixed-rate returns to Australian investors, prompting the transfer of funds from regulated superannuation funds to self-managed superannuation funds (SMSFs) for cryptocurrency conversion.
The opaque nature of blockchain technology complicates the assessment of the full extent of the impact on individuals affected by the companies’ alleged misconduct. It is estimated that approximately 450 Australian investors collectively injected around USD 41 million into these schemes, raising apprehensions about potential financial repercussions.
Upholding Consumer Protection
ASIC’s legal action revolves around accusations of violating section 911A of the Corporations Act, which prohibits companies from delivering financial services without a valid Australian Financial Services Licence (AFSL). ASIC seeks court orders, both interim and final, to halt the NGS entities from offering financial services in Australia without the requisite AFSL.
ASIC Chair Joe Longo emphasized the importance of cautious decision-making by Australians managing their superannuation, particularly when considering investments in crypto-related products like blockchain mining through SMSFs. Longo’s statement underscores ASIC’s commitment to closely monitoring financial products to ensure compliance with regulations and safeguard consumer interests.
Appointment of Receivers
The Federal Court appointed Anthony Connelly, Kathy Sozou, and Jamie Harris from McGrathNicol as receivers for the digital currency assets linked to the NGS companies and their directors. ASIC justified this decision citing the perceived risk of asset dissipation, asserting that appointing receivers is the most effective strategy to protect these assets. Additionally, the Court imposed a travel restriction on Mendham, preventing him from leaving Australia.
Although a court date for the proceedings is pending, ASIC’s investigative efforts persist as evidence is gathered and the case is constructed.
The similarity in names between the investigated companies and NGS Super, a legitimate Australian pensions provider, may have caused confusion among investors. NGS Super clarified its stance, stating that it had previously taken legal action against NGS Crypto and NGS Group to safeguard its trademark and members’ interests. The company welcomed ASIC’s civil proceedings against the NGS entities for allegedly providing financial services without an AFSL. NGS Super reiterated its commitment to not engage in the sale of cryptocurrency or related products, including blockchain, affirming that such activities are not part of their offerings to members.