Crypto operations investigated by ASIC may still be trading, court told

Millions of dollars savers tipped into NGS Crypto were transferred to two directors’ personal bank accounts, potentially to fund their own spending.

Ryan Brown is a director of cryptocurrency company NGS. Picture: LinkedIn

Three cryptocurrency miner companies may still be operating despite being the subject of legal action by Australia’s corporate cop over fears $60m of investor money could go missing.

And the Federal court heard one of the key players involved in NGS Crypto, Ryan Brown, may have lied to authorities about his income and asked that freezing orders obtained by the Australian Securities and Investments Commission earlier this month be changed so he could access $140,000 to pay off a loan on his Dodge Ram – an oversized American ute – among other requests.

On April 10 Federal Court judge Fiona Meagher appointed McGrathNicol receiver of NGS Crypto, NGS Digital and NGS Group to manage their digital assets in a bid to protect $60m invested by about 450 Australians since November 2017.

ASIC asked that the companies’ assets be frozen due to concerns at least a portion of investor funds being used to pay operating costs of some of the companies, including wages, was being transferred to the personal accounts of another director, Brett Mendham, and/or Mr Brown “potentially for their own personal use” and to pay for other consumers’ profit on investment, Justice Meagher’s judgment stated.

ASIC’s case was that the money was “at risk of dissipation”, and that NGS targeted Australian investors to put their savings into blockchain mining by encouraging the transfer of superannuation into self-managed funds to be converted into cryptocurrency.

But as the hearing took place without any of the defendants present, Mr Brown had since applied to the court to change some of the orders as they applied to himself alone, including so that he could pay for “reasonable” living and legal expenses, plus complete a transaction on the purchase of a property for his family on the Gold Coast.

During a hearing on Tuesday, it emerged before Federal Court judge Roger Derrington that “there is no restraint on the company operation” of the NGS companies.

“That is a serious submission by ASIC, is it,” Justice Derrington said.

Ultimately, Justice Derrington said while NGS Digital may have stopped trading “the fact that the mining operations might continue, it may be that income could be earned … and filter through the NGS group”.

A Dodge Ram pick-up truck similar to one reportedly being paid for by Ryan Brown.

The court heard some customers had received a note from NGS, which contained a reference to a court order that NGS was to “cease trading”. But ASIC’s barrister told the court that in an email pertaining to members’ money, NGS claimed it was “not a case where the mining operation has ceased altogether” and the group continued to operate.

As well, the court heard the receivers were concerned Mr Brown deposed in affidavits that he received an annual salary of $75,000 when it was actually closer to $300,000, McGrathNicol’s barrister, Craig Wilkins, KC, said.

“His own evidence raises matters that beg explanation,” Mr Wilkins said.

Barrister Sean Russell for Mr Brown said that disparity was due to commissions his client received.

Mr Russell argued that his client should be allowed to access $10,000 per month for living expenses plus legal costs from the digital assets seized by the court because he does not otherwise have any other private income or assets to draw on.

Mr Brown claimed he needed about $500,000 from the frozen digital assets to complete a property transaction and build a property on the Gold Coast, which included getting $140,000 to pay off the loan on his Dodge Ram, because he said it was “connected to the finance” of his property.

Mr Russell said it was “most regrettable” his client took 10 days to hand over a USB that contained a locked cryptocurrency account, but he eventually gave it to ASIC.

Pending final orders, Justice Derrington allowed Mr Brown $6000 per month for living expenses via the receivers, legal fees plus $135,000 to complete the purchase of land.

NGS Super is not connected to the recent civil proceedings initiated by ASIC against three blockchain mining companies.