Australian Securities and Investment Commission Issues Inquiries into ICO Issuers to Halt Deceptive Practices

The Australian Securities and Investment Commission (ASIC) has taken action to address misleading or deceptive conduct regarding initial coin offerings (ICOs). ASIC announced it was targeting the sale of digital tokens and is issuing inquiries to ICO issuers and their advisers where they identify conduct or statements that may be misleading or deceptive.

The ASIC action has resulted in some issuers halting their ICOs and others have been modified.

In mid April, ASIC received delegated powers from the Australian Competition and Consumer Commission (ACCC) to take action under the Australian Consumer Law relating to crypto-assets. This enables ASIC to take action against misleading or deceptive conduct in marketing or selling of ICOs, even if the ICO does not involve a financial product.

“If you are acting with someone else’s money, or selling something to someone, you have obligations. Regardless of the structure of the ICO, there is one law that will always apply: you cannot make misleading or deceptive statements about the product,” stated ASIC Commissioner John Price. “This is going to be a key focus for us as this sector develops.”

Citing one recent example, ASIC said it took action to protect investors when they “identified fundamental concerns with the structure of an ICO, the status of the offeror and the disclosure in its white paper.”

The ICO in question was said to be an unregulated managed investment scheme. This means the offeror would have been in breach of the relevant provisions of the Corporations Act had the offer proceeded, potentially leading to serious penalties under the Act.

ASIC has recently updated its information regarding ICOs and has also published guidance for investors on the risks of investing in initial coin offerings.

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