Australia’s federal court has granted fintech company Block Earner exemption from a fine despite the court’s discovery that it provided a crypto yield-bearing product without a financial services license.
Justice Ian Jackman made a decision on June 4 that Block Earner had “acted honestly.” When the yield-bearing “Earner” product was introduced, the company did contemplate obtaining a license, but after conducting research and seeking legal advice, it was determined that one was not necessary.
Block Earner’s founder and CEO, Charlie Karaboga, informed Cointelegraph that seeking legal counsel before launching the product demonstrated their honesty and diligence as a startup.
In a statement, Block Earner expressed that the court’s ruling not only spared them from a financial penalty but also acknowledged the damage to their reputation caused by inaccurate statements made by ASIC in a press release following an earlier court decision on liability.
The court directed ASIC to cover Block Earner’s expenses incurred after February 9 — the day Justice Jackman declared that the company’s “Earner” products, which offered yield on loans in USD Coin (USDC), Bitcoin (BTC), Ether (ETH), and PAX Gold (PAXG), required an Australian Financial Services License (AFSL).
Justice Jackman agreed with Block Earner that an ASIC press release from that day was “misleading and unfair” as it claimed that Block Earner’s product “required” an AFSL, even though the product had not been available since November 2022.
Justice Jackman dismissed ASIC’s request for a $234,000 (350,000 Australian dollars) fine. Block Earner requested a $40,000 (60,000 Australian dollars) penalty — three times the amount earned from the product in question.
ASIC announced on June 4 that they are reviewing the court’s decision.
In a previous ruling by Justice Jackman in February, the company’s “DeFi Access” product, which enables the use of the lending protocol Aave, was not penalized as the court determined it did not fall under a managed investment scheme, therefore not requiring an AFSL.
ASIC filed a lawsuit against Block Earner in November 2022, alleging that both the Earner and DeFi Access products needed a license as they were considered managed investment schemes — where investor funds are pooled and used to purchase assets.
The Earner product operated from March 17, 2022, to November 16 of the same year before Block Earner ceased its operations prior to the court proceedings.