Qoin tossed $14m penalty and AFSL ban
- Contributors
- 8 hours ago
- 6 min read
On 27 January 2026, the long‑running litigation concerning the Qoin Wallet product reached its final chapter. The Federal Court handed down its penalty decision in Australian Securities and Investments Commission v BPS Financial Pty Ltd (Penalty) [2026] FCA 18, imposing $14 million in civil penalties, a 10-year injunction restraining unlicensed financial services activity and corrective advertising orders against BPS Financial Pty Ltd (BPS).
In the wake of the judgment, the Australian Securities and Investment Commission’s (ASIC) chair stated:
The size of these penalties underscores the seriousness of BPS Financial’s misconduct and is intended to send a strong message of deterrence to the digital asset industry…. The digital asset industry is well on notice that its products will continue to be a focus for ASIC. We want to encourage innovation and new services for consumers, but not at their expense
Background
ASIC launched legal action against BPS in 2022, alleging unlicensed conduct and that the firm made false, misleading or deceptive representations to about 80,000 consumers or businesses in connection with the Qoin Wallet, a digital wallet used to store and transact a crypto‑asset called Qoin Tokens.
BPS launched the Qoin Wallet in January 2020 and by late 2022, had issued more than 93,000 wallets and raised over $40 million through token sales. BPS did not hold its own Australian Financial Services Licence (AFSL) and instead sought to rely on statutory exemptions by operating under authorised representative arrangements with third‑party AFSL holders, including PNI Financial Services Pty Ltd (PNI).
ASIC alleged that BPS was, in substance, carrying on a financial services business by issuing a non‑cash payment facility and providing financial product advice without an AFSL, and that its reliance on the authorised representative exemption was misplaced.
At first instance, the Federal Court accepted that BPS was unlicensed for most of the relevant period, but found that BPS was exempt for a 10‑month period while acting as an authorised representative of PNI. ASIC appealed that finding, arguing that the exemption in s 911A(2)(a) requires a person to provide financial services “as representative of” the licensee, not merely pursuant to a formal appointment.
The Full Federal Court agreed with ASIC, holding that whether the exemption applies turns on substance rather than form, specifically, whether the financial services were actually provided in a representative capacity or on the issuer’s own behalf. The Court was careful to confine its ruling to the facts declining to rule categorically that a product issuer cannot in all circumstances operate under a Corporate Authorised Representative capacity. On the facts, the Court found that BPS was acting on its own behalf when issuing the Qoin Wallet, and therefore could not rely on the authorised representative exemption during the PNI period. This appeal outcome set the stage for the subsequent penalty judgment.
The Penalty Judgment
Against that backdrop, the penalty judgment was confined to three questions:
whether BPS should be relieved from liability under s 1317S of the Corporations Act;
if not, the appropriate penalty for the unlicensed conduct; and
the appropriate penalty for the misleading representations.
Justice Downes treated the unlicensed activity as a single course of conduct spanning January 2020 to October 2023.
Relief from liability: honesty is necessary but not sufficient
Section 1317S of the Corporations Act permits a court to relieve a contravener from liability where:
the person acted honestly;
the person ought fairly to be excused; and
relief should be granted either in whole or in part.
Justice Downes accepted that BPS acted honestly given that they had obtained legal advice prior to launch, engaged with ASIC early and made genuine attempts to structure their offering compliantly via authorised representative and intermediary arrangements.
As the court observed:
“In light of the legal advice obtained by BPS and its engagement with ASIC, it also cannot be said that BPS acted carelessly or imprudently to such a degree as to demonstrate no genuine attempt to comply with s 911A.”
However, the Court found that BPS knew it required an AFSL unless a statutory exemption applied, yet it proceeded on the assumption that executing an authorised representative or intermediary agreements was, in and of itself, sufficient.
Justice Downes rejected this assumption finding exemptions under section 911A are not engaged by the agreements alone. Whether an exemption applies depends on the factual circumstances of how the financial services are actually provided. BPS couldn’t meet its statutory obligations merely by executing an agreement that does not reflect the reality of the arrangement.
Importantly, none of the legal advice BPS obtained squarely addressed whether the authorised representative or intermediary agreements as operated in practice, satisfied the statutory exemptions.
The Court highlighted that, in circumstances where regulatory uncertainty existed, particularly during the PNI period, this strengthened, rather than weakened, the expectation that BPS obtain precise advice on the execution and practical operation of the agreements.
The Court therefore concluded BPS “ought [not] fairly be excused”.
Valuation of “benefit derived”
Central to the valuation of the penalty was how to identify the “benefit derived” from the unlicensed conduct.
ASIC argued that the benefit of BPS’s unlicensed conduct was the revenue generated from Qoin token sales, whereas BPS argued that:
token sales were separable from the Qoin Wallet; and
in any event, only profit (not revenue) should be relevant.
Although the Qoin Wallet was the NCP product, Justice Downes found it was an essential component of the overall Qoin facility. Without the Wallet, Qoin Tokens could not be sold or used. Revenue from token sales was therefore reasonably attributable to the unlicensed conduct. This conclusion of itself is questionable, although we note the misleading and deceptive conduct breaches extended to conduct relating to the Qoin token.
The Court then turned to whether “benefit” meant profit or revenue. Relying heavily on the High Court’s reasoning in R v Jacobs Group (Australia) Pty Ltd, Justice Downes held that:
the statutory definition of “benefit” is deliberately expansive;
nothing in s 1317G suggests a netting‑off or profit‑based approach; and
a profit analysis would introduce complex accounting disputes ill‑suited to determining maximum penalties.
Accordingly, benefit was determined as the gross revenue actually received during the period BPS engaged in the contravening conduct.
In the reasons for judgment, Justice Downes said:
"During the same period, BPS issued more than 96,000 Qoin Wallets and derived substantial revenues totalling over $42 million from the sale of Qoin Tokens."
Despite the very high maximum, the Court imposed a $2 million penalty for the unlicensed conduct. In reaching this figure, Justice Downes undertook the following analysis:
there was no evidence of consumer loss;
the conduct was deliberate in the sense of being intentional, but not reckless or dishonest;
BPS made genuine attempts at compliance and cooperated with ASIC;
capacity to pay and insolvency risk were relevant, but general deterrence remained paramount to the Court.
Not imposing a penalty, as BPS proposed, would have failed to deter similar conduct and risked treating licensing breaches as a cost of doing business.
Misleading and deceptive conduct
The Court stated that each access of the Qoin website containing a misleading representation constituted a separate contravention of section 12DB of the ASIC Act. Applied mechanically, this would yield a theoretical maximum penalty of “many billions, if not trillions, of dollars”. Justice Downes therefore grouped the representations into contravening representations, being the Fiat Trading Representation, Crypto Trade Representation, Merchant Growth Representation and Approval/Registration Representation.
Justice Downes accepted that some consumers were likely encouraged by the representations, but there was no direct evidence of reliance or loss. The conduct was nonetheless characterised as objectively reckless. BPS failed to appreciate the obvious risk that its statements would mislead consumers, even if there was no subjective intention to deceive.
The Merchant Growth Representation was treated as particularly serious given it remained published for over 12 months after the decline in merchant numbers was known.
ASIC sought $19 million in penalties for the misleading conduct whereas BPS proposed $600,000. The Court rejected both extremes.
Ultimately, the Court imposed:
$4 million for the Trade Representations;
$2 million for the Merchant Growth Representation; and
$6 million for the Approval/Registration Representation,
totalling $12 million.
Injunctions and corrective advertising
Beyond monetary penalties, the Court also ordered:
a 10‑year injunction restraining BPS from carrying on a financial services business without an AFSL; and
extensive corrective advertising orders to reflect that BPS no longer controlled the new Qoin website.
The hefty penalty handed down by the Court indicates that the Courts and the regulator will not take lightly unlicensed conduct or misleading and deceptive conduct involving digital assets. Despite Qoin’s efforts to comply with the law, the Court was significantly influenced by a desire for deterrence. This outcome is a cautionary note to product issues to ensure that they properly understand their obligations even where those obligations are complicated and unclear. It also highlights that mechanical approaches to compliance involve considerable risk as the Court may consider substance over form. Product issuers are encouraged to seek fulsome advice extending to licensing, contracting arrangements, the product lifecycle and disclosure matters in order to mitigate these risks.
Written by Steven Pettigrove, Luke Higgins and Tahlia Kelly