ASIC Shutters $41 Million Crypto Investment Scheme

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  • The Australian Securities and Investment Commission has initiated proceedings against three crypto companies over an illegal $41 million crypto investment scheme
  • NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd, along with their directors, accumulated the haul from over 450 investors
  • The Australian federal court has ordered the seizure of the firms’ cryptocurrency holdings to prevent potential misappropriation

The Australian Securities and Investment Commission has launched proceedings against three crypto companies accused of operating a $41 million crypto investment scheme without a license. NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd and their directors were accused of targeting Australian investors to establish self-regulated superannuation funds, convert the money to cryptocurrency, and invest it in blockchain mining packages with fixed-rate returns. The Australian federal court has ordered that the firms’ cryptocurrency holdings be seized to prevent them from being misappropriated.

$41 Million Invested

ASIC publicized its actions against the NGS group of companies on Friday, noting that the Federal Court had brought receivers in McGrath Nicol to take control over an unspecified amount of cryptocurrencies held by the companies and their directors. It also announced civil action against the directors themselves, Brett Mendham, Ryan Brown, and Mark Ten Caten. Caten has had travel restrictions imposed on him, preventing him from leaving Australia.

There is no suggestion that the NGS companies were operating a scam, with ASIC saying only that the funds seized were “at risk of dissipation and considered the appointment of a receiver was the best way to protect the assets.” 

While not revealing how much was actually frozen, ASIC believes that over 450 Australians have invested approximately $41 million into NGS schemes.

NGS Companies Operated Without a License

ASIC’s allegations center around the companies’ solicitation of Australian investors to participate in blockchain mining packages promising fixed-rate returns. They purportedly encouraged investors to transfer funds from regulated superannuation funds to self-managed super funds (SMSFs), which were then converted into cryptocurrency.

The regulatory body asserts that the three companies violated section 911A of the Corporations Act by providing financial services without the necessary Australian financial services license. As part of its legal action, ASIC seeks interim and final injunctions against the companies to prevent them from offering financial services in Australia without proper licensing.

It seems, therefore, that there is no suggestion that the funds have been mishandled or misappropriated but that the three companies were simply running their operations without the proper license.

ASIC Chair Joe Longo emphasized the importance of investors understanding the risks associated with using their SMSFs to invest in crypto-related products like blockchain mining, noting that the proceedings should “send a message to the crypto industry that products will continue to be scrutinized by ASIC to ensure they comply with regulatory obligations in order to protect consumers.”