ASIC Enforcement Wrap: April 2025

Key April Takeaways:

• Court approves hefty penalty of over $11 million against DOD Bookkeeping, in a stern message against contravening the acceptance of conflicted remuneration which influenced the quality of advice
• ASIC’s success against Green County and Max Funding in civil penalty proceedings underlines risk of solely relying on “business purpose declarations” when classifying between personal and business loans
• AFS Licensees engaged in providing financial advice to retail clients are reminded to register all their financial advisers on the Financial Advisers Register, as ASIC issues infringement notices to three Licensees

Spotlight – Appeal court not convinced by catch-all definitions for cryptocurrency products

A successful cross-appeal by Web3 Ventures Pty Ltd t/a Block Earner (Block Earner) in the Federal Court has set back ASIC in future enforcement activity of crypto-related products.

Block Earner operated its ‘Earner product’, where customers lent Australian Dollars to Block Earner who converted the funds to a cryptocurrency nominated by the customer or lender. The customer was entitled to the return at the end of the loan which was calculated by the price of the amount of crypto loaned plus the fixed rate return.

In its primary judgment, the Federal Court held the Earner product to be a financial product because it involved Block Earner operating a ‘managed investment scheme’ or offering a facility by which a person makes a financial investment. The primary judge declared that Block Earner had contravened ss 601ED(8) and 911A(5B) of the Corporations Act (the Act) because it carried on a financial services business without an Australian Financial Services License (AFSL).

Block Earner cross-appealed the decision, submitting that the primary judge erred in finding that the Earner product was a financial product. ASIC submitted that if the primary judge had erred in this finding on the basis that it was a managed investment scheme or financial investment facility, it was instead a ‘derivative’ under the Act.

The Full Federal Court allowed the cross-appeal. It held that the product was not a managed investment scheme, a facility by which a person made a financial investment, or a derivative. Therefore, Block Earner does not require an AFSL to offer its Earner product to customers.

The matter of Block Earner is one of the first applications of financial services law to crypto-backed products. The appellate judgment provides some clarity to fintech companies in whether they require licensing for their products. Despite ASIC’s attempt to characterise new or novel products under the ‘catch-all’ definitions of ‘managed investment schemes’ and ‘financial investment facility’, courts are not prepared to characterise all novel products, whether cryptocurrency or not, under these definitions.

April in Summary – Enforcement Actions and Outcomes

Civil Action:

Civil Proceedings Commenced

ASIC commenced 2 civil proceedings:

• ASIC has commenced proceedings against Hollard Insurance in the Federal Court for allegedly breaching its duty of utmost good faith contrary to section 13 of the Insurance Contracts Act (Cth). A couple from regional Victoria made a home building and contents claim on 31 October 2021, two days after a major storm damaged the roof of their home. The couple were made to wait 18 months for their claim to be rejected. Hollard Insurance initially accepted the claim, but then delayed making decisions about the repairs, then took over 9 months initiating an inspection by a structural engineer and providing temporary accommodation to the couple. Hollard Insurance rejected the claim in April 2023 where they relied on a non-expert opinion over prior expert reports.
• ASIC has commenced proceedings in the Federal Court against Wiluna Mining Corporation, Milan Jerkovic (Wiluna’s former chair), and James Malone (Wiluna’s former chief commercial officer). On 17 June2022, Wiluna announced that it had raised $57.3 million, however $7 million of those funds were never received by Wiluna, nor was that fact announced. ASIC alleges that Wiluna breached continuous disclosure obligations, that Mr Jerkovic breached his director duties by failing to accurately announce the amount raised by Wiluna to the Australian Securities Exchange (ASX), and that Mr Malone failed to take reasonable steps to ensure that statements made to the ASX were not false and misleading.

Civil Penalties

The Federal Court ordered civil penalties totalling $11,030,000 in 1 case:

• DOD Bookkeeping Pty Ltd (in liquidation) was penalised $11,030,000 by the Federal Court after the Court found it breached conflicted renumeration rules under the Corporations Act. DOD Bookkeeping, formerly Equiti Financial Services Pty Ltd (Equiti FS), paid $130,250 in bonuses to three financial advisers who provided “cookie cutter” advice to 12 clients which failed to take into account each client’s individual circumstances or objectives. The Court also found that the bonuses paid to the three advisers influenced the advice they provided and breached conflict renumeration laws. The size of the penalty to DOD Bookkeeping reflected the seriousness of the misconduct which extended over a period of several years.

Civil Judgments

1 judgment was delivered in ASIC civil proceedings:

• The Federal Court has found that business lender Green County Pty Ltd and business loan introducer Max Funding Pty Ltd engaged in unlicensed credit activity in relation to two loans. Green County and Max Funding failed to make reasonable inquiries about the purpose of loans, instead relying on a “Business Purpose Declaration” for a licensing exemption. This exemption did not apply, because had both entities made these inquiries, they would have known or would have had reason to believe that the loan was not for a business purpose. However, ASIC was not successful in relation to Green County’s director Ms Ivy Tang Gy Ng, with the Court finding Ms Ng had not breached her director’s duties

Other Orders

• The Federal Court granted ASIC’s application to wind-up 95 companies after ASIC found that most of the companies had been incorporated with false information, with some incorporated with suspected stolen identities. Many of the companies were involved with websites or apps with suspected scam activities, which included tricking consumers into making investments into fraudulent foreign exchange, digital assets, or commodities trading. Catherine Conneely and Thomas Birch of CorCordis have been appointed as joint liquidators of the 95 companies.
• The Federal Court has ordered the appointed Liquidators, Ross Blakeley and Paul Harlond of FTI Consulting, to wind up Falcon Capital Limited (Falcon), the First Guardian Master Fund (First Guardian), and related unregistered subsidiary funds. The liquidators were appointed following an application by ASIC due to its concern about Falcon’s management and operation of First Guardian. The Federal Court also ordered that Paul Allen of PKF Melbourne was to be appointed as receiver to the property of David Anderson, a director of Falcon.

Criminal:

Guilty Plea

1 individual pled guilty to charges:

• Michael Steele pleaded guilty to four counts of fraud, contrary to section 408C(1)(a)(i) of the Criminal Code (Qld). While in control of companies related to property development, Mr Steele withdraw funds deposited by 14 investors and used them for his personal benefit, which included purchases of motor vehicles and a residential property. The misappropriated funds totalled more than $1.3 million.

Administrative action:

Licence Suspension

2 companies had their Australian financial services licence (AFSL) suspended or cancelled:

• Beacon Wealth Pty Ltd had their AFSL suspended by ASIC until 7 April 2026 because the company had ceased carrying on a financial services business. In June 2024, the directors of Beacon Wealth were replaced and 100 per cent of its shares were sold to a new owner, who has not been carrying out a financial services business.
• Viridian Equity Group Pty Ltd (Viridian Equity) had their AFSL cancelled by ASIC following a payment of compensation by the Compensation Scheme of Last Resort (CSLR). On 31 October 2024, the Australian Financial Complaints Authority (AFCA) made three determinations against Viridian Equity. On 11 March 2025, CSLR made three payments totalling $450,000 for the AFCA determinations. On 17 April 2025, ASIC cancelled its AFSL as a result of the payments.

Infringement Notices

ASIC issued 5 infringement notices:

• In February 2025, ASIC issued infringement notices to three AFS licensees – Australian Advice Network Pty Ltd, IA Advice Pty Ltd and Sherrin Partners Services Pty Ltd for a penalty of $31,500 for each entity, which has been fully paid. ASIC had reasonable grounds to believe that the AFS licensees had authorised a financial adviser to give advice in relation to financial products while the adviser was unregistered. Each licensee immediately registered their financial adviser and reported the breach to ASIC after becoming aware of the beach.
• ASIC issued two infringement notices totalling $37,560 to debt management company Chapter Two Holdings Pty Ltd. Between 1 August 2023 and 14 March2025, Chapter Two made allegedly misleading statements on its website by claiming it had wiped $80 million in debt and saved consumers $30 million in interest. ASIC alleges that Chapter Two are not able to substantiate the figures, nor provide a justification for the statements. Chapter Two paid its first instalment of the notices on 14 March 2024.

Director Disqualifications

ASIC disqualified one individual from managing corporations:

• Mohamed Chabib was disqualified by ASIC from managing corporations for a period of 5 years following his involvement in four failed companies. Between 2017 and 2025, Mr Chabib was a director of J & B Management Pty Ltd, M & C Management Pty Ltd, Healthy Food Australia Pty Ltd, and Cessy Café Pty Ltd. The four companies owed a total of $1,113,756 to unsecured creditors, including $486,201 owed to the ATO. ASIC found that Mr Chabib had acted improperly and failed to meet his obligations as an officer.

If any of the above is relevant to you or you want to know more, please feel free to get in touch.

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The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.