The ‘NASA command controller’ and the $50 million of lost crypto

Cryptocurrency investment manager Ashod “Ash” Balanian’s investors were told he was a “NASA command controller and mission planner”, had a degree from Harvard and their investments in his Digital Commodity Assets fund, estimated at $50 million, would be safe.

The Federal Court has since heard it’s likely that none of those things are true.

Ashod ‘Ash’ Balanian arrives at court on Friday with his lawyer and a laptop computer that is hoped will finally crack open a locked device storing $50 million of cryptocurrency. Credit: Nick Moir

The fraying of Balanian’s backstory and his struggles to provide liquidators to his investment businesses with access to a cryptocurrency storage device he claims holds tens of millions of dollars of investors’ money has been laid bare over the past four months during public examinations into his business affairs.

Established in 2018, the Digital Commodity Asset fund attracted scores of well-heeled clients in Sydney and Melbourne who each invested a minimum of $50,000. In March this year, investors became concerned about the management and regulatory compliance of the fund and took court action to wind up the scheme.

Liquidators Scott Langdon, Jenny Nettleton and John Mouawad from KordaMentha were appointed in April and that month the Federal Court froze Balanian’s assets – including his sprawling $7 million home in Ingleside in northern Sydney and four other houses. In the months since, investors have watched as Balanian has been quizzed over his business activities.

Balanian has already agreed under examination that a memorandum for the fund given, which described him as a NASA command controller and NASA engineer, was incorrect. He had instead worked for a company that had a large contract with NASA for the Chandra X-ray observatory program. He also told the court he was an alumnus of Northeastern University in Boston, rather than Harvard, as claimed in the memorandum.

Ash Balanian’s home in Ingleside that is subject to asset preservation orders handed down by the Federal Court.Credit: Domain

More concerning for liquidators and creditors has been the list of reasons about why he has so far been unable to present the cryptocurrency holdings of his investors to court as requested.

Previous attempts by Balanian to provide access to the device under court supervision had shown there was no cryptocurrency on it. Balanian told the court in May this was because he had used a “smart contract” that would deliver the cryptocurrency to the device on August 12. When Balanian under examination accessed the device on August 13, there was again no currency, and he insisted it was the result of IT issues and that a new laptop, never before connected to the internet, was required.

On Friday, Balanian – armed with a new laptop designed to his specifications – was back in court for the sixth time to provide the final steps to access the cryptocurrency loaded onto this USB looking stick known as a Trezor cold-storage wallet under examination from the lawyer for the liquidators, Blake O’Neill of ERA Legal.

“You say that computer, as built now in its present format, is the safest way to update the firmware?” O’Neill asked Balanian.

“That’s my opinion,” Balanian responded.

O’Neill asked again: “And, just to confirm … the assets should otherwise turn up on the Trezor device, correct?”

“Depending on the bridging mechanism. There might be some other necessary steps to bind blockchains,” Balanian added.

The device, which Balanian told the court on Friday held 55 million tokens that were expected to be worth $1 each, is now expected to be opened, under court supervision, next month. It could yet yield the cache of cryptocurrency that could provide some sort of return for disgruntled investors.

The liquidators, however, appear to have concerns about whether there are any cryptocurrency assets on the device.

In a note to creditors on August 16, the liquidators wrote: “We have previously indicated to investors that, in our opinion the concept of a ‘smart contract’ delivering the funds is implausible and not supported by any evidence available to us, including what we saw on the laptop available to Mr Balanian where having inserted the Trezor device into the laptop, no digital assets were forthcoming.”

Balanian has long denied any allegation of misconduct or concerns about the administration of the fund.

Balanian told this masthead after Friday’s hearing that he remained committed to co-operating to ensure fund investors received all of their invested money, plus returns.

“It is estimated that original investor capital under management of $13 million has increased in the fund to approximately $40 million,” he said, indicating a reduction in value in the assets held on the device.

“These assets have been available to be distributed to investors for over two weeks.

“To date, the receivers and their legal representatives have failed to do so. I am disappointed that rather than focusing on returning the assets to investors the receivers and their legal representatives continue to needlessly draw out this process at the expense of investors.”

A supporter of Balanian, who spoke on the condition of anonymity because the matter was before the court, said the inability to access the device was more of a reflection on the abilities of the liquidators and had been a costly exercise for investors.

Liquidators have already raised a very different version of events about the fund in a report to creditors in May.

They told clients that Balanian had “given evidence that assists him, is inconsistent and unhelpful”.

“Mr Balanian has done everything he can to avoid telling us what happened with the assets of the companies and the fund. It was only after we sought and obtained a warrant for his arrest that he attended public examinations and when he did his evidence appears to be inconsistent with reality and is likely to be misleading.” (Balanian avoided arrest after presenting a medical certificate.)

“Mr Balanian has engaged in what appears to be serious corporate misconduct and is likely to have misrepresented the activities and value of the companies and the fund.”

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