The Australian Securities and Investments Commission (ASIC) has issued a warning on “misleading” Initial Coin Offerings (ICOs) and crypto-asset funds targeted at retail investors.
In a document published on its website, the financial watchdog says that it has taken action to stop several proposed ICOs. It also recently clamped down on the issue of a Product Disclosure Statement for a crypto-asset managed investment scheme.
Consistent problems identified by ASIC are: the use of misleading or deceptive statements in sales and marketing materials; operating an illegal unregistered managed investment scheme (MIS); not holding an Australian financial services licence.
ASIC Commissioner John Price says: “If you raise money from the public, you have important legal obligations. It is the legal substance of your offer – not what it is called – that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate.”
Recent activity by ASIC
In five other separate matters since April, ASIC acted to prevent ICOs raising capital without the appropriate investor protections. These ICOs have been put on hold and some will be restructured to comply with the applicable legal requirements. ASIC is taking further action in respect of one completed ICO.
On 13th September, it issued a final stop order on a Product Disclosure Statement issued by Investors Exchange Limited (IEL) for units in the New Dawn Fund (Fund). This was proposing to invest in a range of cryptocurrency assets. Following ASIC raising concerns about the PDS, IEL consented to a final stop order so that no units could be obtained under the PDS.
Investor warning
The watchdog concludes: “ICOs are highly speculative investments that are mostly unregulated, and while there are genuine businesses using this structure many have turned out to be scams. ASIC suggests that investors consult the information on Moneysmart before deciding to invest.”
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.