Australian regulators have cracked down on unlicensed blockchain mining companies

Hundreds of Australian investors have been out of pocket more than A$160 million ($104 million) after NGS Crypto Pty Ltd, NGS Digital Pty Ltd and NGS Group Ltd (collectively the “NGS Companies”) collapsed into liquidation.

According to a report on April 12, the Australian Securities and Investments Commission (ASIC) has launched civil proceedings against the companies and their directors Brett Mendham, Ryan Brown and Mark ten Caten.

NGS companies have been accused of targeting local investors to set up self-managed superannuation funds (SMSFs) and then convert the money into cryptocurrency with promised fixed rate returns on blockchain mining packages.

ASIC said about 450 investors had entrusted a total of $US62 million ($40 million) to these companies.

The financial regulator has successfully applied to the Federal Court to order liquidators specifically for NGS companies' digital currency holdings, citing concerns about the dispersal of digital assets from blockchain mining. Mendham was banned from leaving Australia.

In addition, ASIC has moved to prevent NGS companies from providing financial services in Australia without proper licences.

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ACC chairman Joe Longo has warned Australians not to invest their SMSF in cryptocurrency and reiterated the commission's commitment to upholding investor protections through regulation.

Meanwhile, fellow Australian cryptocurrency entities DCA Capital, Digital Commodity Assets Pty Ltd and Digital Commodity Assets Fund are also facing liquidation and Federal Court proceedings.

Investors' concerns about mismanagement, lack of proper licensing and violations of managed investment scheme regulations led to the move.

Cordamenta, which has been appointed liquidator, has raised a total of $US100 million ($65 million) in debt to 100 investors. A federal court has ordered DCA Capital director Ashed Balanian to surrender his passport after $55 million ($36 million) in assets were frozen.

Regulators in Australia have been paying more attention over the past couple of months. On March 21, ASIC Commissioner Alan Kirkland highlighted the need to address the “regulatory trilemma” for financial innovation, including consumer protection, market integrity and financial innovation.

Australia has recently been called a country poised for an “inflection point” in crypto demand. While institutional crypto demand in the area remains sluggish, stablecoins and welcome policy moves could spark activity.

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