Key takeaways:
- Block Earner was exempted from paying a fine by an Australian federal court, even though the court found that Block Earner did not possess a license to provide a crypto product.
- Charlie Karaboga stated that seeking legal advice prior to product launch demonstrated their integrity and full range of actions as a startup.
The fintech company Block Earner was exempted from paying a fine by an Australian federal court, even though the court found that Block Earner did not possess a financial services license to provide a crypto yield-bearing product.
Block Earner “acted honestly,” according to Justice Ian Jackman’s June 4 ruling. When its yield-bearing “Earner” product was introduced, the company considered obtaining a license, but after conducting research and consulting with legal counsel, it decided it didn’t require one.
Charlie Karaboga, the founder and CEO of Block Earner, stated that seeking legal advice prior to product launch demonstrated their integrity and full range of actions as a startup.
Block Earner issued a statement in which he noted that the ruling not only spares the company from financial penalties but also recognizes the “reputational damage” caused by “inaccurate” assertions made by ASIC in a press release that followed the Court’s previous ruling about responsibility.
Block Earner’s costs from after February 9, when Justice Jackman found that the company’s 2022 “Earner” products, which promised yield on loans in USD Coin, Bitcoin, Ether, and PAX Gold, required an Australian Financial Services Licence (AFSL), were ordered to be paid by ASIC by the court.
An ASIC news release from that day that said that Block Earner’s product “needs” an AFSL was misleading and unjust, according to Justice Jackman, who concurred with Block Earner that the announcement was misleading. The product has not been available for purchase since November 2022.
The Australian Securities and Investments Commission (ASIC) requested a $234,000 (350,000 Australian dollars) fine, but Judge Jackman rejected it.
Block Earner requested an amount equal to three times its earnings from the product it was sued for, or $40,000 (60,000 Australian dollars). In a press release dated June 4, ASIC stated that it is examining the ruling.
The company’s “DeFi Access” product, which makes it easier to use the lending protocol Aave, avoided penalty in Justice Jackman’s February verdict because the court determined that it didn’t function as a managed investment scheme and hence didn’t require an AFSL.
ASIC filed a lawsuit against Block Earner in November 2022, claiming that since both the Earner and DeFi Access products were managed investment schemes—a financial arrangement in which a fund pools client funds and utilizes them to purchase assets—they required a license.
Block Earner terminated the Earner product before the court proceedings began, and it ran from March 17, 2022, until November 16 of the same year.
