The Australian Securities and Investments Commission is appealing the Federal Court’s decision in a case brought against Finder Wallet Pty Ltd for allegedly providing unlicensed financial services.
ASIC claimed that Finder Wallet’s Finder Earn product was a debenture and that Finder breached product disclosure obligations and failed to comply with design and distribution obligations.
In a judgment last month, the court dismissed ASIC’s claim that Finder Earn was a debenture.
ASIC filed a notice of appeal yesterday, with a date for the hearing yet to be set.
Finder Earn was a crypto-based product. To participate, customers had to apply for an account with Finder Wallet via the Finder app. They could then transfer money into their account and convert those funds to an Australian dollar denominated stablecoin called TrueAUD.
Customers were offered a return at rates of either 4.01 per cent or 6.01 per cent. They could transfer unspent funds back into their own bank accounts at any time.
The question of whether Finder Earn was a debenture depended on a reading of section 9 of the Corporations Act, which says “debenture” means “a chose in action that includes an undertaking by the body to repay as a debt money deposited with or lent to the body”.
ASIC argued that when a customer transferred money into their Finder Wallet account, it could be characterised as a deposit in line with one element of the definition of a debenture.
But the court rejected this, saying that unlike bank deposits the funds transferred to Finder Wallet were not intended to raise capital for the recipient entity. The funds could not be seen as “deposited with” or “lent to” Finder under the act, even though customers might be unsecured creditors for their account balances.
The court accepted that customers had a “chose in action” but said that “not every chose in action, which includes an undertaking to make payment of a sum of money constitutes a debenture” of the kind envisaged in the Corporations Act.
The court also ruled that instead of a traditional debt repayment, Finder Wallet made a “contractual promise” to repay customers. Although Finder Earn was described using terms such as “lending” and “loans”, the contractual obligation was not the same as “usual fund raising activities traditionally associated with the issue of debentures”.
In a statement yesterday, ASIC said: “ASIC has appealed this decision because it is concerned that the Finder Earn product was offered without the appropriate licence or authorisation and therefore without the benefit of important consumer protections.”