Finder Trial to Find Out if Yield Product a Debenture in Australia
Late last year, in the wake of the FTX collapse, Finder Earn, offered by Finder Wallet, swiftly "sunsetted" and ceased being available to users. Shortly after that occurred, the Australian Securities and Investments Commission (ASIC) commenced proceedings against Finder Wallet, arguing that Finder Earn was in substance a debenture offered by Finder Wallet. This came after Block Earner's yield product was attacked by ASIC, being called a 'financial investment' but interestingly not a debenture.
The Finder Earn product offered users the ability to earn interest on True AUD (TAUD), not on fiat currency, that is users had to first convert fiat currency to TAUD, and then deposit that TAUD with Finder. Finder had a real time interest payment calculator showing interest earned and paid out all interest promised to customers.
As we noted at the time:
ASIC alleges that the product offered by Finder Wallet is a debenture because customers deposit money with the understanding their money would ultimately be repaid, this is a marked difference from the allegation made in relation to Block Earner by ASIC.
The case against Finder is listed for hearing today, which is co-incidentally on the same day that the trial against FTX founder Sam Bankman-Fried commences. Crypto-asset companies in Australia will be watching the Finder hearing and judgment closely given the absence of clear guidance in Australia around what crypto-asset products require licensing and just how licensed products can be offered in Australia.
Attempts to offer licensed crypto-asset products have previously come under attack, in the case of Holon, which fund subsequently closed, or have failed to attract sufficient interest to remain in market, in the case of Cosmos' Bitcoin ETF.
By Michael Bacina