One of Australia’s best-known comparison websites is being sued by the corporate regulator for allegedly providing illegal financial advice and putting consumers at risk of harm after offering a cryptocurrency product without a financial licence.
The Australian Securities and Investments Commission (ASIC) has commenced civil proceedings in the Federal Court against a subsidiary of Finder for a product offered via its registered cryptocurrency exchange called Finder Wallet.
The action has been prompted by its controversial crypto product Finder Earn, which allowed customers to invest in a stablecoin and earn a 4 per cent return or in some cases 6 per cent.
At the time of its launch in November last year, Finder said customer’s investment would provide an attractive return, but without the volatility normally associated with digital currency.
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The product was launched in November 2021 and more than 11,000 Australians had joined a waitlist, the company claimed last year, with Angus Kidman, Finder’s editor-in-chief saying there was “nothing like this in Australia”.
But ASIC is alleging the company provided unlicensed financial services, breached product disclosure requirements and failed to comply with design and distribution obligations.
The product was closed last month in what the company claimed was a strategic business decision due to rising interest rates making the product less attractive.
But in a statement released on Thursday, ASIC said after it notified Finder Wallet of its concerns, the company ceased offering Finder Earn from November 24 this year and all funds were returned in full to customers.
Finder is licensed to provide financial services as a representative of Centra Wealth, but a disclaimer on its website said that its Finder Earn product was not offered under any financial licence.
When Finder Earn was launched, the company said it was not a banking product or savings account but offered a stable, deposit-like return.
However, ASIC has alleged the product was more accurately defined as a “debenture” – where money is borrowed without being secured against any collateral.
“This is because customers deposited money with Finder Wallet on the understanding that their money would ultimately be repaid, together with a return for allowing Finder Wallet to use their capital,” ASIC said in a statement.
It also alleged that offering Finder Earn without a licence exposed consumers to potential harm, including the possibility that they were offered a product that was not suitable for them.
“ASIC also alleges that Finder Wallet required an Australian financial services licence to offer Finder Earn, because it was providing financial product advice or dealing in a financial product,” the corporate regulator added.
ASIC deputy chair Sarah Court said because Finder Earn appeared to be a financial product, Finder Wallet had a requirement to comply with disclosure and obligations to protect consumers.
“Issuers of financial products such as debentures must issue appropriate risk disclosure documents and develop appropriate target market determinations to ensure that consumers are not sold inappropriate products,” she said.
“We allege that Finder Wallet failed to do this, potentially putting their customers at risk of harm.”
A Finder spokesman said the company would defend the court proceedings.
“We do not share ASIC’s view that Finder Earn can be regarded as a debenture,” the spokesman said.
“Since Finder Earn was launched in November 2021, we have proactively engaged with ASIC and have co-operated fully with all ASIC requests for information. An innovative product, Finder Earn offered customers a way to earn yield on their crypto.”
He added all customers’ money had been returned, while the product had also paid out $500,000 to customers of Finder Earn before its demise.
Finder co-founder Fred Schebesta has been a big advocate of cryptocurrency and has also been dubbed Australia’s “crypto king”.
Ms Court added this was ASIC’s third recent action against a firm offering a crypto-asset related product that the regulator considered to be a financial product.
“Our message to industry is clear – just because an offer involves a crypto-asset related product does not guarantee it will fall outside the current regulatory regime,” she added.