Block Earner ‘on notice’ as ASIC takes aim over lack of licence

Crypto lender Block Earner has been hit with court action after ASIC repeatedly put the operator on notice over its lack of a financial services licence.

A Sydney cryptocurrency lender – which claimed it didn’t need to register with the corporate regulator – is allegedly running an illegal investments scheme.

The Australian Securities and Investments Commission, in Federal Court filings, is alleging Web3 Ventures – operating as Block Earner – offered fixed returns on crypto-linked assets without a licence in breach of the law.

Block Earner offered investors a fixed yield investments product based on a suite of crypto assets, which ASIC claims were financial products which should have been licensed. Block Earner lent funds deposited by customers on an unsecured basis. ASIC claims Block Earner picked up almost 240 customers, who put at least $1.5m worth of funds onto the platform since it launched in March 2022.

The crypto company received at least $6.5m backing from several major investors including crypto-focused venture capital firm Framework Ventures, Coinbase Global, and Web3 investment fund LongHash Venture.

Aave founder Stani Kulechov, who was suspended from Twitter after joking he would be installed by Elon Musk as the chief executive of the social media group, also backed Block Earner, documents lodged with the regulator show.

ASIC claims Block Earner operated the scheme from at least March 17 until it was put on notice on November 16, when it pulled the Earner products.

Block Earner is registered with the Australian Transaction Reports and Analysis Centre, but did not register with ASIC in a move the regulator claims was in breach of the Corporations Act.

Block Earner did not respond to requests for comment, but the company’s general manager Apurva Chiranewala has previously told the Financial Review : “Governance moves at its pace, and we are trying to not hold ourselves back, but we are watching and ready for that.”

ASIC claims Block Earner should have registered with the regulator as it was operating an investments scheme and offering financial products.

Sarah Court, ASIC’s deputy chair, said Block Earner’s pronouncements it would not register put the crypto operator on the regulator’s radar. Ms Court said it was not ASIC’s job to tell a company that it had to register for a licence, but noted it had “been on notice for some time”.

“We look at a matter as is the normal course we say in our view this is a financial product you’re offering a financial service in our view we think you should have an (Australian Financial Services Licence),” she said.

“The underlying involvement of a crypto asset does not take this asset outside of protection that should be offered by an AFSL”

ASIC claims Block Earner spruiked its investment scheme, telling customers it would “take care of the heavy lifting” with an “industry leading-security, to make decentralised finance a more inclusive space for all”.

Ms Court said crypto assets were “risky, inherently volatile and complex and ASIC remains concerned that potential investors in crypto-assets may not fully appreciate the risks involved”.

“ASIC supports the development of an effective regulatory framework covering crypto-assets to protect consumers and investors,” she said in a statement released on Wednesday.